India's crude imports and refinery runs remained robust in April as refiners shipped in cargoes contracted earlier and refrained from backing out of deals despite a second wave of COVID-19 triggering demand destruction fears. Analysts, however, said the full impact of the crisis will get reflected only in May numbers.
Although India started to witness record COVID-19 cases in the early part of April, the number of regional lockdowns started to increase only towards the later part of the month and early May, while the country stayed away from a national lockdown. As a result, refiners met all their April import commitments, analysts said."Just like last year, India's refiners had been slow to respond as crudes were bought in advance. There was also uncertainty over demand weakness as different states took on measures of varying restrictions to contain the spread of coronavirus," said Lim Jit Yang, advisor for Asia-Pacific oil markets at S&P Global Platts Analytics.
"But as they started to realize the severity of demand impact from lockdown measures, they are expected to reduce runs and some have already done so as sales of the first half in May turned out to be very weak," he added.
India imported 18.26 million mt of crude in April, or an average 4.5 million b/d, up 10.3% year on year, provisional data from the country's Petroleum Planning and Analysis Cell, or PPAC, showed, reflecting a lower base in the year-ago month as India was under a nationwide lockdown. Imports in April were almost unchanged from March levels.
For the January-April period, India's crude imports fell 2.3% year on year to 73.12 million mt, or 4.5 million b/d. In 2020, India's crude imports fell 10.3% year on year to 201.5 million mt, or 4 million b/d, according to PPAC.
Crude runs under pressureIndia's oil product demand fell 9.4% to 17 million mt in April over March volumes, and demand in May is expected to decline even further month-on-month, analysts said.
The average run for refineries in India was 97% in April compared with 99% in March, the latest survey of the country's oil ministry showed. However, run rates were higher from about 72% a year earlier.
In April, state-run refineries recorded a 98% run compared with 61% a year earlier and 106% in March. The flagship state-run refiner Indian Oil Corp., or IOC, recorded an average of 104% combined run for all its nine standalone refineries in April compared with 53% a year earlier and 100% in March.
Indian refiners processed 19.88 million mt of crude oil in April, or an average of 4.86 million b/d, up 34.86% on the year. The April figure was 5.24% lower than March levels.
Analysts said the refinery runs in May could decline further.
"Refiners in India have had to reduce utilization rates given the demand hit in the domestic market following the latest wave of COVID-19. May numbers are likely to show a larger impact on refinery operations, as this is the month when daily COVID-19 cases peaked," ING Economics said in a research note.
The market is getting a better idea of the impact the latest wave of COVID-19 has had on domestic oil demand, with IOC saying that its gasoline and diesel sales had fallen by around 15%-20% due to the latest wave.
Sustained recovery seen after JuneIndia's oil demand is expected to witness a growth of 260,000 b/d year on year in the first half of 2021, and 390,000 b/d year-on-year in H2. Demand in H2 will be 700,000 b/d higher than H1, driven by a more broad-based pickup in economic activity amid widening vaccination rollout. Platts Analytics expects India's oil demand in 2021 to remain below the 2019 level, mainly due to a weak first half, with an annual growth of 325,000 b/d over 2020.
The Nomura India Business Resumption Index, or NIBRI, fell to 60 for the week ending May 23, from 63 in the prior week. It is now at levels last seen in June 2020, after having fully recovered in February.
"Both mobility and non-mobility sectors have been hit. The continued steep fall in NIBRI supports our view that the worst hit to activity will occur in May. For a sustained recovery, the pace of vaccination also needs to pick up, which we expect to happen after June," Nomura said.
Oxford Economics said it had revised down its 2021 economic growth forecast for India to 9.1% from 10.2% earlier.
"The international experience suggests that tighter restrictions will need to remain in place until at least 28% of the population has received one dose of the vaccine to contain the risks of renewed rise in cases. We estimate that India will reach the vaccine threshold by mid- to late-August, and accordingly expect restrictions will be extended into Q3," said Priyanka Kishore, head of India and South East Asia Economics at Oxford Economics.
