India's gasoline demand seen hitting record as COVID-19 curbs ease

India'sgasolinedemandis set to hit arecordthis fiscal year, with consumption accelerating as more people hit the road for business and leisure travel after easing ofCOVID-19curbs.

Shunning trains, buses and planes, safety-conscious Indians are buying more cars and increasingly using personal vehicles to commute as they embark on 'revenge travel' flocking to tourist destinations after months of restrictions, despiterecordhigh fuel prices.

Annual passenger vehicle sales in India rose by 45% to 264,442 units in July, driven by pent-updemand, according to data from the Society of Indian Automobile Manufacturers.

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The stronger-than-expectedgasolineconsumption growth could prompt Indian refiners to import the fuel or boost gas oil exports in coming months. Indian refineries are traditionally configured to maximise production of diesel, wheredemandis still below pre-COVIDlevels, hurt by an uneven economic recovery.

"We may have to import some quantity of petrol if momentum indemandcontinues," said an official at an Indian state-run refiner, who declined to be identified as he is not authorised to speak to the media.

"We cannot increasecrude throughput as some refiners have high levels of diesel inventory and export margins for diesel are not attractive."

The expected rise inIndia'sgasolineimports could support Asian refiners' margins for the fuel. The country, which has a refining surplus, has shunnedgasolineimports since May and raised gas oil exports by a fifth in July from April, government data showed.

Sluggish dieseldemandhas forced some refiners to cut crude oil processing as their fuel storage were full. That reducedIndia'sJuly crude oil imports to their lowest in a year.

Changes inIndia'sfueldemandpatterns are crucial for global oil markets as Asia's third-largest economy isseenas the main driver of risingdemandfor energy over the next two decades, the International Energy Agency said in February.

Credit rating agency Moody's India unit ICRA expectsIndia'sgasolineconsumption to rise 14% to arecord31.9 million tonnes (739,000 bpd) in the fiscal year to March 2022, higher than the 12.2% growth estimates by the Petroleum Planning and Analysis Cell of the oil ministry.

Consultancy FGE now forecasts quarterlygasolinedemandwill rise by 20,000 barrels per dayto 760,000 bpd for October to December, up from an earlier estimate of 740,000 bpd. This brings FGE's annual forecast to March 2022 to 725,000 bpd, up 11% from the previous year.

"Owning a personal vehicle used to be a status symbol but because of the hunger to travel during the pandemic, people are buying cars and scooters, and driving upgasolinedemand," Sri Paravaikkarasu, director for Asia oil at FGE said.

India'sgasolinedemandrebound follows that of China, where consumption of the fuel is expected to rise by 11% to 13% this year to arecord3.8 million to 4.1 million bpd.

DIESEL

On the other hand, gas oil consumption, which accounts for two-fifths of refined fuel use in the country and is a barometer of industrial activityis expected to take well into the fourth quarter or even next year to recover to pre-pandemic levels.

India is also gradually cutting dependence on diesel as it looks to fully electrify its vast railway network by end-2023, allow trucks to carry more weight, and increasepower generation capacity from cleaner fuel sources.

Mukesh Surana, chairman of Hindustan Petroleum Corp (HPCL) said dieseldemandcould reach pre-COVIDlevels on a monthly basis later this year but for the fiscal year it would still remain below pre-pandemic level.

"There has to be a complete recovery of the industrial and construction sectors and wholedemandand supply chain should come to full swing, until that happens you will not get the full impact of recovery on the diesel side," Surana said.