India’s oil consumption to outpace China’s this year, Platts Analytics

The Dollar Business Bureau

Oil consumption in India is likely to increase by 7-8% this year, overtaking the demand growth in China for the third year in a row, as the demonetisation impact is expected to be for a short-term, according to Platts. 

The demand for LPG (liquefied petroleum gas) and transport fuels will increase, while demand for naphtha will get a boost due to new petrochemical projects. 

“For the third year in a row, India's oil demand growth will outpace China's demand growth,” Platts Analytics said in a note, while adding that it was likely to rise at around 7% to 4.13 million barrels a day in 2017 as compared with 3% in China’s oil demand to 11.5 million barrels a day.

The cash crunch after the move of demonetisation is likely to dampen temporarily the country's consumption for oil products in the first 3-month period or maybe a slight longer period, it said. 

"Whereas the growth fundamentals for oil demand in India continue to be high, slow growth in the starting months of this year due to demonetisation may dampen the overall growth of oil demand in 2017 to a little below of 2016 levels of 9%,” it said. 

“The dramatic increase in oil demand in India highlights no faltering signs. The country will continue to be a driver of growth in Asia in 2017, Platts said. 

Indian government's drive for clean fuel, sharp expected growth in demand for transport and air travel, and the insatiable rise in petrochemicals will serve as a driver for petrol, LPG, jet fuel and naphtha, supporting oil products to reach close to double-digit growth this year, equivalent to the growth seen in 2016, if not higher. 

Diesel demand is likely to increase by around 4.5-5% in 2017, a little lower than the levels in 2016, as demonetisation had impacted the rural incomes. 

The demand for LPG is likely to grow by around 10.5% year-on-year in 2017, as compared to the estimated 11% in 2016. 

However, the demand for naphtha is likely to witness a double-digit growth.