Singapore—India's efforts at avoiding a national lockdown, despite the surge in COVID-19 cases to record highs, will likely prevent a sharp decline in the country's appetite for oil and gas, with most analysts still hopeful that energy consumption would register positive year-on-year growth in 2021.
But regional lockdowns in some provinces and restrictions imposed on certain activities following the surprise surge in infections may prevent a sharp recovery in oil and gas demand that analysts were expecting earlier this year."India's crude consumption could see a short-term drop, as the number of fresh COVID-19 cases continues to rise at an alarming pace," Rajat Kapoor, managing director for oil and gas at AWR Lloyd, told S&P Global Platts.
"Unless key consumers like India go in for sustained lockdown restrictions -- something that Indian Prime Minister Narendra Modi has shunned in his address -- the dent to global crude consumption is not expected to be that severe, the current vertiginous spread of the virus notwithstanding," he added.
Kapoor said even though COVID-19 cases had surged from around 8,500 cases a day in early February to nearly 250,000 cases, partial lockdowns had only led to a 5% drop in gasoline and a 3% drop in diesel sales in the first half of April, compared with the same period in the previous month.
"And this trend could exacerbate in the second half as more and more states impose localized restrictions on personal movement and commerce," he added.
India's crude imports fell 10.3% year on year to 201.5 million mt in 2020, or 4 million b/d, data from the Petroleum Planning and Analysis Cell showed, as oil products demand in 2020 posted negative growth for the first time in nearly two decades.
Lockdown a last resortModi said in an address to the nation on April 20 that India was well prepared to combat the pandemic, compared with last year's first wave, as he urged leaders of the various states to focus on micro containment zones and use the option of a lockdown only as a last resort.
S&P Global Platts Analytics expects India's oil demand in 2021 to remain below that of 2019 due to weakness in the first-half following re-imposed lockdowns in some states, but will register a year-on-year growth of 400,000 b/d, after declining 470,000 b/d in 2020.
Sumit Pokharna, vice president of Kotak Securities, said short and partial localized lockdowns are unlikely to severely distort growth prospects, although the recovery would be prolonged unless vaccine supplies are ramped up significantly and the current surge in infections is brought under control over the next few weeks.
"Localized lockdowns do not have much of an impact, especially if industrial activities continue. Further, it may impact, but not meaningfully, to the demand outlook for petroleum products, LNG and natural gas in the medium term. In 2021, we are better prepared to handle COVID-19 than in 2020," Pokharna added.
India's demand for oil products rose 17.9% year on year to 18.8 million mt, or 4.8 million b/d, in March, according to the PPAC data. But for the cumulative January-March period, demand for oil products rose by a modest 2.2% year on year to 54 million mt.
"As of now, most of our refineries are operating at full capacity and there are no plans to impose big run cuts unless we see widespread lockdowns," a senior official at a leading state-run refiner said.
Implications for gasGas industry officials said domestic gas demand had also suffered, albeit modestly, over the past few weeks, but it will not be large enough to make a substantial impact on the country's overall gas demand for the entire year.
"Our domestic gas demand is about 22-23 million cubic meters/d. We have seen a dip of about 2 million cu m/d over the past two weeks. City gas might take a hit. Some industries are facing labor issues," an official at a leading LNG firm said.
Platts Analytics expects India's LNG imports to grow roughly 10% year on year over May-July.
"However, if the country imposes a similar lockdown to what they did last year due to the rising COVID-19 infection rate, it could bring their demand down nearly 40% from expected levels, effectively dropping from 111 million cu m/d to around 75 million cu m/d during the lockdown period," Jeff Moore, manager for Asian LNG Analytics at Platts said.
A leading LNG importer said that Indian buyers were currently not focusing much on fresh spot deals, or signing long-term deals. "We are just focusing on bring in LNG cargoes as part of the existing term deals."
