A Passage from India

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Indian oil demand rose over 10 percent in January, up for a fourth consecutive month. Although much of the magnitude of the year-on-year improvement is due to last year’s low base, with consumption in January 2017 hamstrung by the hangover of demonetization, the upward trend signals ongoing strength in the Indian economy.

India has recently been dealing with a number of different changes to its domestic fuel market. It is still recovering from a change in the pricing methodology of its retail petrol and diesel – from fortnightly to daily – in order to pass on the benefit of price moves lower. (Unfortunately, this has had the reverse effect in the rising market of the last six months).

India is also set to introduce low-emission fuel to Delhi in April – Euro VI grade gasoline and diesel – some two years ahead of the countrywide launch, in an effort to curb pollution. There was extensive maintenance last summer to upgrade Indian refineries to meet more stringent standards, but we can see from our ClipperData that net exports have picked up dramatically since. 

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As the chart below illustrates, while net exports of gasoline have gradually dropped over the last year – as domestic demand has continued to improve – rising global demand for middle distillates has boosted exports to over 800,000 bpd in recent months – lifting net exports. India sent middle distillates last year to a whopping 56 countries. 

India net product exports ClipperData.jpg

India’s status as a net exporter is set to grow in the coming years. Indian refiners are making plans to raise refining capacity by 77 percent by 2030, up to