Demand for fuel surges in May as economy opens up

NEW DELHI : Demand for petroleum products doubled in May from the previous month, the country’s largest refiner Indian Oil Corp. Ltd (IOC) said, as India’s economic engines whirred back to life with the easing of lockdown restrictions. Capacity utilization, which had shrunk to 39% at the beginning of the coronavirus lockdown , has since rebounded to 83%, the refiner said on Wednesday.

“The crude oil throughput of Indian Oil refineries crossed 80% as on date, with consumption of all petroleum products put together almost doubling in May as compared to April levels," IOC said in a statement. India’s power and overall energy demand, which had nosedived, is also slowly returning to pre-lockdown levels, Mint reported. Energy consumption , especially electricity and refinery products, is typically linked to overall demand in an economy.

“The corporation has been able to gradually raise the throughput of its refineries from about 55% of rated capacity in the beginning of May to about 78% by month-end, and 83% as on date. Capacity utilization of the refineries had dropped to almost 39% in the beginning of April," the statement added.

With the world slowly opening up for business, oil prices are rising after April’s downward spiral, when demand almost vanished in a world under lockdown. The international benchmark Brent crude was trading at $40.44 per barrel on Wednesday, and West Texas Intermediate was at $38.06 per barrel at the time of going to press. Brent crude hit a 21-year low and US oil futures slumped to negative for the first time as the glut overwhelmed the world’s limited storage facilities, triggering a wave of selling by traders in April.

Transportation demand had come down with citizens cooped indoors, though there has been an increase in demand for domestic cooking gas during the nationwide lockdown.

“While the consumption of all petroleum products put together almost doubled in May compared to April levels, growth of petrol was higher at about 70% and diesel at 59%. Compared to May 2019, or the early months of the current year prior to the lockdown, the growth percentage has still to catch up by 24% to 26% for all products. In the case of LPG, with the corporation rolling out about 25 lakh cylinder refills a day, the average backlog is less than a day," the note said.

“With Guwahati refinery coming online after maintenance shutdown, refineries are geared to operate at 90% of capacities this month, as products demand in the market increases," the statement said.

The cost of the Indian basket of crude, which comprises Oman, Dubai and Brent crude, averaged $56.43 and $69.88 per barrel in FY18 and FY19, respectively. It was $19.90 in April, according to data from the Petroleum Planning and Analysis Cell. The price was $40.54 a barrel on 9 June.