The resurgence in COVID and the resultant city and state-specific restrictions may shave-off about 20-25 percent of auto fuel demand in April, consultancy Wood Mackenzie said on Thursday and estimated a modest impact on oil demand in the absence of a full nationwide lockdown.
At the end of April, overall fuel demand is down by about 7 percent from pre-Covid level of April 2019," Arun Singh, Director for Marketing and Refineries at Bharat Petroleum Corporation Ltd (BPCL), said to PTI.
India's COVID crisis shows no sign of slowing. The country has reported new cases above 3 lakh per day for two weeks straight, though experts think the true number is likely to be far higher, it said. "Yet despite increasing calls for the government to impose a nationwide lockdown to reduce the rate of infection, Prime Minister Narendra Modi has so far resisted, citing the economic impact on an already suffering population."
Compounding this terrible human tragedy, the crisis is also impacting the country's near-term economic performance as travel is curtailed and local restrictions enforced.
"This is inevitably impacting the country's energy markets, with all sectors being impacted. However, without a nationwide lockdown along the lines of that seen in Q2 (April-June) 2020, energy demand has so far proven relatively resilient, despite the more severe levels of infection compared to 12 months ago," Wood Mackenzie said in a report.
It trimmed India's GDP forecast to 9 percent year-on-year in 2021 from 9.9 percent previously due to the second peak of COVID cases. But there is further downside risk if lockdown measures and restrictions on movement are tightened further.
"While current localised restrictions appear inadequate in comparison to the severity of the pandemic, tighter restrictions come with expectations of additional financial support from the government; India's stimulus measures have been modest since the start of the pandemic, totalling 9 percent of GDP. If a nationwide lockdown is enforced, the government will need to provide much more," it said.
With the domestic economy gripped by the pandemic and the looming risk of a nationwide lockdown, external demand and export-orientated industries are now critical for the economic recovery in the short term.
Road traffic oil demand down
During last year's lockdown, India's oil demand fell by 1.2 million barrels per day in April-June, equal to about a 25 percent drop. Road traffic was particularly impacted, recording a peak decline of some 45 percent during April 2020.
Oil product consumption almost halved in April 2020 with petrol demand slumping by a record 60.5 percent and diesel by 55.6 percent.
"We've not seen anything this severe yet in the current crisis. And while many states and territories have implemented restrictions in movement, without a full nationwide lockdown, we expect the impact on oil demand to be more modest: road traffic oil demand in April 2021 is estimated to be down by about 20-25 percent," the report said.
Ironically, it is the scale of the current crisis that is offering some support to oil demand. "Responding to such large numbers of infections is resulting in a significant increase in personal mobility and transportation of medical equipment and supplies," it said, adding under current restrictions much of economic activity is still permitted, particularly within the industrial sector.
This will encourage a recovery in mobility, particularly aviation as domestic flight numbers follow last year's pattern of resumption.
"As such, we expect demand losses to be concentrated in Q2 (April-June) at around 200,000 barrels per day with gasoline (petrol), diesel and jet fuel combined accounting for most of this contraction," it said.
But if lockdown is extended for the entire month of May in those states with the most severe current restrictions, then loss of oil demand for Q2 2021 in the range of 300,000 bpd to 500,000 bpd. "Should a nationwide lockdown be imposed then losses will inevitably increase further."
Sale of petrol -- used in cars and motorcycles -- fell to 2.14 million tonnes in April, the lowest since August, according to the preliminary data of state-owned fuel retailers.
Petrol, diesel sales down in April
Petrol sale in April was 6.3 percent lower than March 2021 and 4.1 percent lower than April 2019. Petrol sales in April 2020 was 872,000 tonnes.
Demand for diesel -- the most used fuel in the country -- fell to 5.9 million tonnes in April 2021, down 1.7 percent from previous month and 9.9 percent from April 2019. Diesel sales in April 2020 was 2.84 million tonnes.
With airlines continuing to operate at less than capacity, jet fuel (ATF) sales in April was 377,000 tonnes, down 11.5 per cent over March 2021 and 39.1 per cent over April 2019. Jet fuel sales in April 2020 was 5,500 tonnes.
Cooking gas LPG sales fell 3.3 per =cent to 2.1 million tonnes in April 2021 when compared with the previous month. The sale was 11.6 percent higher than 1.88 million tonnes in April 2019.
