IEA sees surge in India’s oil demand

On a day when the Indian basket of crude oil touched a three-anda-half year high of $76.31 a barrel, the International Energy Agency (IEA) said in a report that following a rise of 125,000 barrels per day in 2017, India will see an acceleration in oil demand to 300,000 barrels per day in 2018. This is despite a drop in global demand of oil.

On Wednesday, the Indian basket touched its highest point since December 1, 2014, when it was seen at $76.43 a barrel. However, since the rupee depreciated against the dollar since then, the impact on the trade balance is likely to be higher.

The rupee is currently trading around 67.53 against a dollar, against 61.80 in December 2014.

India could, however, expect some moderation in global prices if global demand fell in the second half of 2018, the IEA report said.

In March, India's oil demand rose by 335,000 barrels per day, contributing to a growth of 360 kilo barrels per day in the first quarter.

A very strong increase in gasoil deliveries (150,000 barrels per day) was the main reason, the report said.

The demand for liquefied petroleum gas also grew by 55,000 barrels per day during the first quarter on the back of the Pradhan Mantri Ujjwala Yojana.

"All the factors that contributed to a slowdown in 2017 such as demonetisation and the imposition of the goods and services tax (GST) are behind us," the report said.

On the other hand, global oil demand growth for 2018 has been revised slightly downwards to 1.4 million barrels per day from 1.5 million barrels per day.

"Kerosene demand declined slightly during the quarter, as heating grades were replaced by LPG, while jet fuel received support from booming air transport. Gasoline demand also posted strong growth of 75,000 barrels per day in the first quarter on robust car sales," the IEA said. Growth in demand is expected to slow down during the second quarter of the year due to higher crude oil prices. World oil demand is expected to average 99.2 million barrels per day in 2018. Meanwhile, global oil supplies held steady at close to 98 million barrels per day in April.

OPEC crude production eased by 130,000 barrels per day in April to 31.65 million barrels per day, on further declines in Venezuela and lower output in Africa. "Compliance with the Vienna Agreement reached a record 172 per cent. The call on OPEC crude and stocks will average around 32.25 million barrels per day for the remainder of 2018, nearly 0.6 million barrels per day higher than the April output," the report added.