Demonetisation expected to temporarily dampen India’s oil appetite: Analysts

India’s oil demand growth rate to eclipse China’s, said Platts Analytics

GN Bureau | January 17, 2017


#Facts Global Energy   #demonetisation   #oil products   #Platts Analytics   #China   #oil demand   #India  
ONGC oil and gas processing platform in Mumbai
ONGC oil and gas processing platform in Mumbai

The dramatic rise in India's oil demand shows no signs of faltering, leading analysts say that the country will remain a driver of Asian growth in 2017. 

Consumption is expected to rise by 7-8% this year, outpacing China's demand growth for the third consecutive year, said Platts Analytics in a note issued from Singapore.
 
The cash crunch following New Delhi's move in early November to demonetize more than 80% of its currency is expected to temporarily dampen the country's appetite for oil products in the first quarter, or maybe a little longer, it said.
 
But gains in oil demand that the country is set to achieve from the "Make in India" initiative -- which aims to raise the share of manufacturing in GDP over the next few years -- will more than offset the negative effects of demonetisation, analysts said.
 
The government's clean fuel drive, sharp anticipated growth in transport demand and air travel, and the country's insatiable growth for petrochemicals will act as a boon for gasoline, jet fuel, LPG and naphtha, helping oil products to post close to double-digit growth in 2017 -- similar to that seen last year -- if not higher.
 
"For the third year in a row, India's oil demand growth will outpace China's demand growth," Platts Analytics said in a note, adding that it was expected to grow at about 7% to 4.13 million b/d in 2017, compared with 3% in Chinese oil demand to 11.5 million b/d  (barrels per day).
 
India's demand for oil products in November rose 12% year on year to 16.6 million mt, or 4.35 million b/d, data from the Petroleum Planning and Analysis Cell showed.
 
Over January-November, oil products demand rose around 9% year on year to 176.36 million mt, or 4.1 million b/d.
While growth fundamentals for oil in India remain high, slower growth in the initial months of 2017 because of demonetization might pull down the overall oil demand growth in 2017 to a shade below 2016 levels, according to analysts.
 
"If successful, the effects of demonetisation are expected to be temporary, and indexes are expected to bounce back," said Amrita Sen, chief oil analyst at Energy Aspects.
 
"We believe that H2 2017 oil demand will see limited impact from demonetization as the initial economic impact peters out and government spending, particularly on infrastructure, rises from increased tax collection. Indeed, if implemented correctly, demonetisation will lead to a jump in private investment and more public spending on welfare measures," she added.
 
The note said that the BJP-led government, since coming to power in 2014, has undertaken a series of initiatives to help boost LPG penetration across the country.
 
It has aggressively pushed to expand the LPG dealership network in the country, while it has urged the more affluent class to give up LPG subsidies and pass those savings to the economically poorer sections of society.
 
"We are seeing a series of government initiatives to enhance LPG penetration in the rural areas. This should help to sustain growth rates for the clean fuel at double-digit levels for several months in 2017," said Sri Paravaikkarasu, head of oil, East of Suez, at Facts Global Energy.
 
She said LPG demand was expected to grow by about 10.5% year on year in 2017, compared with an estimated 11% in 2016. And as the government discourages the use of kerosene in households, its demand is estimated to fall by close to 11% from 2016 levels, according to Facts Global Energy.
 
 
The BJP-led government last year gave the go-ahead to state-owned companies to raise the prices of kerosene, which accounts for more than 40% of the total petroleum subsidies, by a small amount every month until April.
 
The note went on to say that since India deregulated diesel prices in October 2014, gasoline demand continues to grow sharply and analysts expect demand to show double-digit growth again in 2017.
 
"Despite demonetisation hitting motorcycle sales in the near term, growth should rebound in the second half of 2017. Passenger vehicle sales, which are mainly backed by direct loans, should continue to grow. This should support buoyant gasoline sales after the ripples of demonetisation get absorbed in about three to four months," Paravaikkarasu added.
 
Analysts expect gasoil demand to grow by about 4.5-5% in 2017, slightly lower than 2016 levels, as demonetisation had affected rural incomes.
 

Comments

 

Other News

On a personal note: Javed Jaffrey

After his much-appreciated debut in Meri Jung in 1985, Javed Jaffrey inspired a new generation of dancers. He then turned from dance to comedy. The versatile actor constantly changes his styles and his live, film, TV and radio appearances always promise novelty and surprise. In 2014 he joined the Aam A

Allegations against CJI: Inquiry will strengthen the independence of the judiciary

Yes, we must stand rock solid with the judiciary and the judges. We must protect the independence of the judiciary too. What does this mean in the present context of a very serious charge of sexual harassment levelled by a former employee of the court against the CJI?  We are told that there is a larg

“Managing data is challenging”

The Centre for Railway Information Systems (CRIS) is a society set up by the railways ministry in July 1986 to provide IT related services to the Indian Railways. CRIS deals in a gamut of functions, like passenger ticketing, freight operations, train dispatching and control, crew management, e-procurement,

A boost to those who need it most

What are 600 million people? Almost twice the population of the US. What are 500 million people? About three-fourth of the population of Europe. Why are we talking about these numbers? Well, because as per a study by Sandhya Krishnan and Neeraj Hatekar (‘Rise of New Middle Class in India and Its

Expanding Eureka!

Abright yellow van with figures of children playing with a whirligig, a Newton’s cradle, a magnetic compass rolls into the Government Higher Primary School in Kittaganahalli, on the outskirts of Bengaluru. Students in the playground leave what they are doing and mill about it in excitement. For they

The spark in the classroom

Not many children dream of starting an idyllic school of their own when they grow up. But Ramji Raghavan, founder of the Agastya International Foundation – which fosters the creative learning of science in stude



Current Issue

Current Issue

Video

CM Nitish’s convoy attacked in Buxar

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter