Indian oil demand, says a report from Platts Analytics, rose a marginal 0.4 per cent during the first quarter (Q1) of 2017, against 2.2 per cent in China. Demonetisation is given as the key reason.
The earlier expectation for 2017 was six to seven per cent growth in Indian demand, versus about two per cent for China.
"The sudden announcement by the Modi government of the demonetisation exercise late last year has immobilised Indian oil demand, impacting industrial and consumer sectors, which suffered from the immediate removal of over 80 per cent of the existing currency," the report said.
The decline was seen in fuel oil, gas oil and naphtha. Kerosene demand has also dropped, with the government move to substitute it with liquefied petroleum gas (LPG) for cooking. Total kerosene sales in the quarter slumped 31 per cent year-on-year (YoY), to an average of 100,000 barrels per day (bbl/d).
China’s oil demand saw relatively robust growth for the six major products — LPG, naphtha, jet fuel, gasoline (petrol), gas oil and fuel oil.
In both countries, LPG is now the largest oil product being imported, although the end usage is different. "LPG demand in India has benefited from growing penetration in the consumer sector, increasing by a whopping 46 per cent in Q1. The fuel — mainly propane — is used for cooking in the residential sector and has seen the robust annual growth of about 10 per cent in recent years due to fuel subsidy reforms and roll-out of the clean fuels plan for poorer households," the report added.
It said the Ujjwala scheme that aimed to fully fund five million LPG connections by 2019 resulted in increasing the national LPG coverage from 60 per cent in January 2016 to 70 per cent of total households currently. This year, LPG demand growth is expected to rise by 10 per cent overall in India, keeping pace with the expansion seen in the first quarter.
"Bearing the brunt of the impact of demonetisation, sales of two-wheelers plunged by 22 per cent YoY in December 2016, while passenger vehicles sales dipped 1.8 per cent in the same period. Vehicle sales rebounded to a combined 1.7 per cent growth in March 2017 as remonetisation progressed and motorists rushed to get new cars ahead of the implementation of the BS-IV fuel standards in April," the report added.
Aviation demand in both countries continues to increase at a robust pace, with India’s growth at 15.4 per cent to 162,000 bbl/d for the quarter.