The demand for petroleum fuels in India is set to drop to 6-year low in the wake of economic slowdown. As per the Petroleum Planning and Analysis Cell of the oil ministry, the country's consumption of petroleum products in the FY 2019-20 is likely to surge just by 1.3% to 216 million tons. This is the slowest pace of growth in demand for petroleum products since 2013-14, when crude oil prices averaged at more than $100 per barrel.
The slowdown in consumption growth is indicative of a general economic crisis with demand waning for goods across product categories. For the September ended quarter, GDP hit a 6-year low of 4.5%. At the same time as per the latest data, October IIP contracted for the third-straight month mainly on account of energy-intensive industries including construction goods, infrastructure and capital goods.
The International Energy Agency, which estimates India to be the fastest growing consumer of oil through the year 2040, anticipates the country's demand to slow down to 145000 barrels per day in 2019 and recover thereafter in 2020 to 180000 barrels.
As per the PPAC, diesel consumption, the highest consumed petroleum product that also supports the country's transport, agriculture and manufacturing industry, is expected to witness the slowest growth in 6 years at 0.9%.
"We think the story for gasoil is not over yet," said Senthil Kumaran, a Singapore-based analyst at industry consultant FGE. "We expect a gradual recovery in diesel consumption in the next six months."
Furthemore, Fitch Solution earlier during the month revised the forecast for country's oil demand growth lower to 3% from a previous estimate of 5% primarily due to sluggish growth prospects of the country's economy in the forthcoming quarters.