New Delhi: India’s GDP growth and low global crude oil prices will lead to the country to higher fuel consumption over the next 18 months, Moody’s Investors Service said on Monday. “We expect the Indian economy to grow at a faster pace, with GDP growth for the fiscal year ending March 2016 at 7 percent and 7.5 percent for the following year,” Moody’s said in a report. The report said improved economic growth coupled with low oil prices will support higher consumption of refined petroleum products in India over the next 18 months.
“Lower crude prices will reduce refiners’ feedstock costs and minimise working capital requirements, which together with healthy earnings, will boost cash flows and allow refiners to reduce borrowings,” the ratings agency said in “Refining and Marketing – Asia Outlook Stable on Modest EBITDA Growth, Easing Supply Overhang”. It said state-run Indian Oil Corp (IOC) and Bharat Petroleum Corp (BPCL) have reduced their debt levels over the past 12 months.
Moody’s estimated that 300,000 barrels per day of new capacity from IOC’s Paradip refinery and 112,000 bpd from expansion of Bharat Petroleum’s Kochi refinery will come online through 2016. “We anticipate the current wave of capacity additions will reduce refiners’ production costs and boost refining complexity. This capacity to produce more higher-value distillates per barrel of crude oil will also amplify supply pressure,” it said. Moody’s also expects the region’s improved supply-demand balance would encourage regional refiners to keep refinery utilisation rates stable over the next 18 months amidst increasing capacity.