• India’s oil demand down 0.8% on year in December, expected to further slow in Q1
• Recovery still likely in H2, driven by a more broad-based pickup in economic activity
• India’s oil demand expected to rise 270,000 b/d in 2022, though with downside risks

India’s December oil product demand was down 39,000 b/d or 0.8% year on year, dragged lower by minor products such as asphalt, which were down 88,000 b/d. According to the latest data from the Petroleum Planning and Analysis Cell, gasoline, kerosene/jet and gasoil were up 30,000 b/d, 28,000 b/d and 30,000 b/d, respectively. But LPG, naphtha and fuel oil were down 20,000 b/d, 15,000 b/d and 4,000 b/d, respectively.

India’s economy fared well in December with GST collection at Rupees 1.29 trillion, down only 2% from November, which was very high due to festive pent-up demand. But still the GST collection for December was 13% higher than in the same month a year earlier and 26% higher than in December 2019. Similarly, though December manufacturing and services PMIs eased from November’s levels, they remained well above the 50-threshold, indicating expansion in both sectors.

Going forward, India’s oil demand is expected to slow further in Q1 with rising COVID-19 cases in the country, falling 275,000 b/d from Q4 2021. Further ahead, India’s oil demand in H2 is expected to be 283,000 b/d higher than H1, driven by a more broad-based pickup in economic activity amid an improving COVID situation and widening vaccination rollouts. Gasoil demand will rebound sharply, but jet fuel use will also improve as international flights start to resume, though they are likely to remain well below capacity. On the basis of latest developments, S&P Global Platts Analytics has revised down our forecast of India’s oil demand in 2022 by 30,000 b/d and expects the growth to be 270,000 b/d instead, up from 240,000 b/d in 2021, though the full impact of the omicron variant is still being assessed.