Demand for diesel declines 12.5% over the previous month, petrol 1% lower in July

NEW DELHI: Demand for diesel in July fell 12.5% over the previous month while that for petrol was 1% lower, halting a swift recovery seen in the previous two months as lockdowns in states and high fuel prices dampened sales, industry executives said. Compared with a year ago, diesel was down 21% in July, while petrol fell 11%. The data is for sales by state-run fuel retailers, which control 90% of the market.
Sale of aviation turbine fuel (ATF) rose 3.8% in July from a month earlier but was down 65% from the July of 2019 due to the absence of international flights and limited domestic operations. Sales of liquefied petroleum gas, used mainly as cooking fuel in India, rose 10% month-on-month and were up 3.4% year-on-year.

Oil demand is unlikely to return to pre-Covid levels any time soon as the disease continues to spread and states respond with more lockdowns, Indian Oil Corp chairman Shrikant Madhav Vaidya said on Friday. India is reporting more than 50,000 coronavirus cases daily, sparking fears among people and pushing state governments to extend lockdowns, affecting mobility, economic activity and fuel demand.

Inter-state movements still face many challenges, leading to weaker demand for diesel, another executive said.

High prices of petrol and diesel, mainly due to higher taxes, have also slowed down demand recovery. Domestic fuel prices are high despite low international oil prices as the central and state governments have sharply raised duties.

Industry executives say until economic activity accelerates fuel demand is unlikely to rise further.

Faltering local demand and an oversupplied export market have also affected refinery run rates that had almost recovered to pre-Covid levels. Average refinery run rate at Indian Oil, the nation’s largest refiner and fuel retailer, has fallen to 75% from 93% in early July. Indian Oil chairman Vaidya expects run rates to stay around 70-75% for the rest of the year.

Lower output is also prompting refiners to cut crude purchases.