India’s oil product demand, which had been experiencing negative growth, recorded a 2.9% year-over-year increase in October, reaching 5.1 million barrels per day (b/d). This rise, observed after the end of the rainy season, reflects improvements in agricultural activities, vehicle sales, and a recovery in the construction and mining sectors.
Diesel, the main driver of this recovery, saw its demand surge by 19.9% in October, while vehicle sales grew by 32% year-over-year, according to Commodity Insights. Two-wheelers led this growth with a 36% increase, followed by passenger vehicles (+32%) and commercial vehicles (+6%). These dynamics allowed Indian refineries to maximize operations, maintaining high utilization rates in preparation for the months ahead.
Strengthened Agricultural and Industrial Activity
The post-monsoon period facilitated an intensification of agricultural activities and a resumption of construction projects, which are often paused during the rainy season. These essential sectors contributed to an increase in energy consumption, especially diesel, vital for agricultural machinery and transportation. Additionally, traditional festivals like Diwali and Navratri boosted demand for transportation fuels, indicating an overall recovery in consumption.
At the same time, refineries adjusted their operations. Indian facilities processed an average of 5.2 million b/d of crude in September, representing a 4.8% year-over-year increase. This processing level is attributed to the end of refinery maintenance operations and an anticipation of the seasonal demand rise.
Outlook Until December
Analysts forecast a 4.5% increase in oil demand in November, followed by a slowdown to 2% in December, attributed to colder weather conditions in northern India. However, the wedding season, with approximately 4.5 million ceremonies expected, is likely to continue boosting road fuel consumption.
Year-end holidays may also increase demand for aviation fuel. Despite this, Indian officials are closely monitoring crude oil price fluctuations and geopolitical risks, such as the Russia-Ukraine tensions, which could impact the market.
Global Impact and Annual Trends
In the first ten months of 2024, oil product consumption rose by 2.8% compared to 2023, reaching 5.1 million b/d. The main contributors to this growth include a 2% rise in diesel and an 8.4% increase in gasoline demand. Liquefied petroleum gas (LPG) and aviation fuel demand also grew by 6.8% and 9.3%, respectively, during the same period.
Despite uncertainties related to geopolitical tensions and international crude price fluctuations, the outlook for 2024 remains positive. Officials hope that current pressures will ease, enabling the Indian market to benefit from increased stability.
