India's demand for oil products in November rose 12% year on year to 16.6 million mt, or 4.35 million b/d, latest provisional data from the Petroleum Planning and Analysis Cell showed.
The higher growth in November was the second straight month of positive growth, after a negative growth in September when demand fell 0.8% year on year to hit a two-year low of 14.6 million mt, or 3.82 million b/d.
In October, demand for oil products rose 6.6% year on year to 16.5 million mt, as demand for transport fuel rose after the rainy season ended in September.
"Half of the November 2016 demand growth was due to higher petrol/diesel sales, which had been elevated as fuel stations continued accepting old high-denomination currencies," said a Credit Suisse report Wednesday.
On November 8, India scrapped its Rupees 1,000 and Rupees 500 currency notes with immediate effect nationwide, except at fuel stations where the notes were allowed to be used for a slightly longer period.
The rise in demand for transport fuels was the main reason for the increase in November, with diesel consumption rising 10.5% year on year to 6.75 million mt and gasoline consumption rising 14.3% to 2 million mt.
LPG demand continued to be strong in November, rising 16.5% year on year, reflecting the government's thrust on providing new household connections for the economically challenged sections.
Focus on the reduction in government subsidy on kerosene led to a cut in kerosene demand by around 32% year on year in November.
The Credit Suisse report forecasts LPG demand to sustain more than 10% growth over the near term, due to the government action on increasing LPG penetration in rural households.
Industry officials held that India's ambitious plan to promote the use of LPG and discourage kerosene and firewood would push LPG demand growth to double-digit levels.
They viewed the government's 'Make in India' initiative to raise the manufacturing sector's share of GDP to 25% from the current 16% by 2025 as providing a massive support to diesel demand.
"Looking at the growth outlook, the long-term trend for oil demand in India looks very promising," said Lalit Kumar Gupta, chief executive officer of Essar Oil, in an interview with S&P Global Platts on the sidelines of the Petrotech conference last week in New Delhi.
Over January-November, oil products demand rose around 9% year on year to 176.36 million mt, or 4.1 million b/d.
Cheaper fares kept demand for jet fuel on a higher level. In November, jet fuel demand rose 8.2% to 583,000 mt.
Gupta called the demand for aviation fuel a "bright spot," as air travel in India is no longer a luxury.
