Flood-hit India's oil demand falls the most in 14 years

By Saket Sundria and Dhwani Pandya on 9/12/2017

MUMBAI (Bloomberg) -- India’s oil consumption in August shrank 6.1%, the most since April 2003, as floods ravaged several parts of the country curbing demand for diesel and gasoline.

The world’s fastest growing oil consumer used 15.75 million tons of fuels in August, compared with 16.78 million tons a year ago, according to the oil ministry’s Petroleum Planning and Analysis Cell. Demand for diesel fell 3.7% to 5.9 million tons. The fuel accounts for about 40% of total oil product sales in the country.

“Severe flooding in parts of the country may have impeded freight and manufacturing activities causing overall demand to contract,” said  Nevyn Nah, a Singapore-based oil products analyst at Energy Aspects. “Also, demand growth was exceptionally strong in August last year resulting in a high base.” India’s oil demand grew 18% in August 2016.

Gasoline consumption in August fell 0.8% to 2.2 million tons, while demand for petroleum coke declined 29.3% to 1.9 million tons. This is the second time this year that India’s oil demand has fallen sharply. In January, it declined by 5.9% following the effects of Prime Minister Narendra Modi’s cash ban.

Kerosene usage shrunk by more than 41% during the month to 292,000 tons as the fuel continued to be replaced by liquefied petroleum gas for cooking.

Seasonal rainfall that caused floods in Assam, West Bengal, Bihar and Gujarat provinces led to a decline in transportation affecting demand for both gasoline and diesel. Heavy rainfall also caused a drop in usage of diesel-run pumps used to water farms.

Nah expects reconstruction activities to begin once floods subside, which will boost diesel demand from September onward.

India, expected to be the fastest-growing consumer through 2040 by the IEA, has seen its oil demand fall in four out of eight months this year. The country imports more than 80 percent of its crude requirement.

Additional consumption data for August:

LPG demand gained 12% to 2.06 million tons naphtha consumption fell 7.6% to 1.06 million tons bitumen usage increased 8.5% to 229,000 tons.

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