Oil demand in India is expected to remain positive this year despite worries over an industrial slowdown in China affecting related economies, and a cut in global crude production, experts said.

These factors had been cited to stress an impending fall in demand a few months back. But most are now increasingly pointing to rising economic activity in the country as a trigger for further increases in India’s domestic demand.

In its monthly oil report for December, the Organization of the Petroleum Exporting Countries (OPEC) has projected India’s oil demand in 2024 at 5.59 million barrels per day (b/d), up from 5.37 million b/d in 2023, resulting in a growth of 4.1 per cent. The global cartel of countries has pegged India’s demand at 5.14 mb/d in 2022. On the other hand, demand in China is expected to rise by 3.6 per cent.

India’s liquid fuel consumption, which includes crude oil and refined petroleum products, is expected to grow at an average of 0.3 million b/d in 2024, the United States Energy Information Administration (EIA) said in a recent report. “We forecast India’s demand growth will increase to 331,000 b/d in 2024 from 268,000 b/d in 2023, helped by favourable base effects and only a slight slowing in GDP growth (6.0 per cent in 2024 from 6.1 per cent in 2023),” it said.

In 2022, India consumed 4.9 million b/d of oil products and liquids. According to S&P Global, this consumption is forecast to rise to 5.2 million b/d in 2023 and 5.3 million b/d in 2024, it said in a report last week. It expects India’s oil demand to grow by 258,000 barrels per day in 2023.

Demand from South Asia, which includes India’s neighbouring nations, will likely increase by 3.2 per cent in 2024, exceeding China’s 2.9 per cent, it had said.

“The domestic consumption of crude oil is expected to grow by 4-5 per cent in FY24 (2023-24), over FY23 driven by economic growth, increased mobility, and air travel,” Prashant Vasisht, senior vice-president and co-group head – corportae ratings at ICRA, said.

Commodity analysts at Standard Chartered have said the rise will be helped by favourable base effects and only a slight slowing in GDP growth, which they expect to clock 6 per cent in 2024, compared to 6.1 per cent in 2023.

Vashisht also pointed to India’s burgeoning gas demand, which has kicked into high gear in the current year. “The gas demand is expected to grow at a healthy pace of 8-10 per cent in FY24, driven by increasing consumption by the city gas distribution sector amid an expanding network, strong demand by the industrial segment, and a surge in offtake by the power sector amid rising power demand,” he said.

The domestic gas production is expected to increase to 100 million metric standard cubic metre per day (mmscmd) in FY24 and 107 mmscmd in FY25, up from 94 mmscmd in FY23, driven by the operationalisation of RIL-BP’s KG-D6 and ONGC’s KG-98/2 fields.
Source: Business Stannard