India's oil demand rose to a record high of 17.10 million mt (4.33 million b/d) in March as strong vehicle sales, infrastructure push, the government's LPG penetration scheme, and robust air travel supported consumption across the barrel.
Though in absolute terms, India's oil demand pales in comparison with China's implied oil demand of 11 million b/d, in terms of growth, India is clearly leading the way.
Demand in March rose 16.4% year on year -- the second highest growth rate in over a decade. In the first quarter, India consumed an average 4.24 million b/d, up 13% year on year.
This compares with a 0.9% year-on-year apparent oil demand growth seen in China for the first two months of the year, according to Platts data.
Diesel, which accounts for roughly 40% of India's total oil products demand, rose 15.12% year on year to a record high of 6.78 million mt, data released earlier this week by the Petroleum Planning and Analysis Cell showed. According to analysts, better fleet utilization and strong commercial vehicle sales have boosted diesel demand.
"Sustained growth in commercial vehicle sales, especially the medium and heavy vehicle segment, remained a key propelling factor for the demand boost," Facts Global Energy said in a report Wednesday.
Demand for transport fuels would have also been helped by the ongoing campaign for assembly elections in four states.
In the first quarter of 2016, India's diesel demand has risen 11.3% year on year to 19.5 million mt, the PPAC data showed. GASOLINE DEMAND AT RECORD HIGHS
Gasoline demand in March rose a whopping 21.5% on year in March to a record high 2.05 million mt, the data showed.
Demand was also up 11.3% from February.
According to Credit Suisse, population growth can explain 10%-12% of demand growth, but any growth beyond is likely due to higher driving.
FGE pointed out in its report that sustained strength in gasoline demand was largely due to resilient passenger car sales last year.
"The two biggest automakers in India, Maruti Suzuki and Hyundai, both posted their best ever sales in the country in the fiscal year 2015-2016 (April-March)," FGE said, adding that overall, lower pump prices and a shift in consumer preference towards gasoline vehicles have been among the primary reasons boosting gasoline demand.
Gasoline demand has risen 15.3% year on year in first-quarter 2016.
LPG BOOTING KEROSENE OUT
LPG demand in March also reached a record high of 1.835 million mt, up 14.16% on year, driven by the government's push to increasing LPG penetration in rural households.
"The government has mandated oil marketing companies to grow LPG dealerships by around 60% this year. We believe this improvement in LPG penetration can help sustain double-digit demand growth," Credit Suisse said. As LPG penetration grows, India is seeing a drop in its kerosene demand.
Kerosene demand fell 4% year on year to 566,000 mt in March and is down 3.5% year on year in Q1 2016.
Jet fuel demand rose to a record high of 563,000 mt in March -- up 8.8% year on year, the PPAC data showed.
Demand in Q1 2016 for jet fuel has risen 10% year on year.
The number of passengers flown "in domestic airlines increased 23% year on year [over January-February], and [the] higher distance travelled by aircraft explains robust demand growth," Credit Suisse said.
STRONG NAPHTHA DEMAND
India's naphtha demand rose 3% year on year to 1.211 million mt with demand in Q1 2016 rising 14.5% year on year.
Demand has been supported by the start-up of a new naphtha cracker.
FGE said that it expects the strength in naphtha demand to continue going forward due to various other petrochemical additions.
"In line with this, the country's naphtha exports are expected to decline at 9.7% per year between 2016 and 2020, it said.
Demand for fuel oil, meanwhile, soared nearly 40% year on year to 697,000 mt in March, and was up 25% year on year in Q1 2016, the PPAC data showed.
According to FGE, though natural gas is preferred over fuel oil by industry and power users, low prices have provided support to demand.
"Going forward, we expect fuel oil demand to come off as the cheaper renegotiated LNG prices start filtering through to consumers," it said in its report.
