Fuel demand falls for 2nd straight month in February

NEW DELHI:  High fuel prices seem to be taking a toll on fuel consumption in India with petroleum product demand falling for the second straight month in February. According to data from the Ministry of Petroleum’s Petroleum Planning and Analysis Cell (PPAC), overall petroleum product consumption fell 4.5 per cent to 17.212  million tonnes in February compared to the previous month as demand for both petrol and diesel contracted. 

A perusal of the data shows that this is the lowest petroleum product demand recorded since September last year, when it had come in at just 15.5 million tonnes. While the month-on-month growth trend had had a hiccup in July and August, consumption falling from 16.09 million tonnes in June to 15.6 MT in July and 14.43 MT in August, demand had remained on a steady upward path beginning September (15.5 MT) rising to 17.8 MT in October, 17.9 MT in November, and 18.6 MT in December 2020.

But the sharp increase in fuel prices starting early this year has led to a reversal of the trend starting January  2021 at 18 MT. Diesel and petrol consumption have both tracked the larger trend, falling for two straight months in January and February. Diesel, the most used fuel in the country, saw demand fall 8.5 per cent in February compared to the previous month (6.55 MT) while petrol consumption was down 6.5 per cent to 2.4 million tonnes.

Naphtha sales remained unchanged, but the sale of bitumen used for making roads—fell 11 per cent. Cooking gas LPG sales, however, were up by 7.6 per cent. Meanwhile, oil cartel OPEC’s monthly oil report has forecast that India’s oil demand would see a 13.6 per cent jump in 2021 to 4.99 million barrels per day. The country’s oil demand had fallen 10.54 per cent in 2020 to 4.40 million bpd from 4.91 million bpd in 2019.

“The encouraging macroeconomic indicators, together with significant decreases in Covid-19 cases across the country, provided a solid foundation for India’s 2021 oil demand outlook,” it said.  OPEC said that the recent positive developments in industrial activity will result in industrial fuels being the backbone for oil demand growth, with a healthy rebound for transportation fuels providing further support. It noted, however, that the aviation sector will remain under pressure throughout 2021. 

8.5 per cent m-o-m fall in diesel demand

6.5 per cent m-o-m fall in petrol demand