India’s oil demand to remain healthy in Jan-March 2023

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Bhubaneswar : Backed by a strong GDP growth rate, India’s oil demand is expected to be healthy in the January-March (1Q23) period, the Organisation of Petroleum exporting countries (OPEC) has estimated in its monthly oil market report.

“In 1Q23, India’s oil demand is expected to remain on a positive trajectory, growing on average at 0.2 mb/d y-o-y. In 1Q23, gas-to-oil switching is expected to continue. Similarly, zaid crops are sown and harvested between March and July. Given these factors, combined with healthy annual GDP growth of 5.6% in 2023, the total demand in 1Q23 is expected to remain healthy. The improvement in demand growth will be aided by mobility and steady demand for distillates in manufacturing and construction. The residential and petrochemical sectors’ demand for light distillates will also remain steady amidst the aviation sector’s demand for jet/kerosene” said OPEC.

India’s oil demand outlook in 4Q22 should continue to benefit from strong annual GDP growth of 6.5% in 2022 and robust manufacturing activity. An expected rise in consumer confidence will support mobility and demand for industrial products. Furthermore, the post-monsoon kharif harvesting season and construction activity are also expected to support demand growth. Accordingly, oil demand in 4Q22 is projected to grow by 0.3 mb/d y-o-y. Distillates are expected to be supported by harvesting, construction and manufacturing activity in October. Additionally, annual traditional festivities and an influx of travellers will support mobility and boost gasoline demand, and improvements in air travel will aid jet/kerosene demand. Finally, rising natural gas prices will lead to gas-to-oil switching in power generation and the industrial sector, thus improving the demand for fuel oil and distillates.

Meanwhile, OPEC has kept the growth forecast for India in 2022 and 2023 unchanged at 6.5% and 5.6%, respectively. Potential growth might come in the form of better-than-anticipated 3Q22 growth as well as faster stabilizing for the elevated inflation rates. Downside risks include higher inflationary pressures, slower credit growth, and potentially, the deterioration of the global economy and a surge in COVID-19 cases.

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