After recording negative growth during August and September 2024, India’s demand for refined petroleum products is expected to appreciate further in the current month after staging recovery in October.

According to S&P Global Commodity Insights, India’s oil product demand reversed a period of negative growth and posted a close to 3 per cent Y-o-Y growth in October 2024 as the monsoon season ended, a trend that is set to continue in November on the back of higher vehicle sales during the festival period and robust demand from the agricultural sector.

“Oil demand in November is set to be bolstered further, after strong vehicle sales that we saw during the festive periods of Navratri and Diwali in October. This is expected to enhance transportation fuel consumption,” said Himi Srivastava, South Asia oil analyst at S&P Global Commodity Insights.

Retail vehicle sales increased by 32 per cent Y-o-Y and 64 per cent M-o-M in October. All categories experienced healthy year-over-year growth—two-wheelers at 36 per cent, three-wheelers at 11 per cent, passenger vehicles at 32 per cent, tractors at 3 per cent, and commercial vehicles at 6 per cent.

“Additionally, October and November are set to witness heightened activity in the agricultural sector, along with a resurgence in construction and mining activities, which typically slow down during the monsoon season,” Srivastava added.

According to S&P Global Commodity Insights, India’s oil demand is projected to increase by 4.5 per cent Y-o-Y in November, before slowing to 2 per cent in December, compared with the previous year. The overall demand growth for Q4 is set to average 3 per cent Y-o-Y.

“An estimated 4.5 million weddings are planned this year, spanning approximately 45-50 days starting mid-November. This is likely to boost road fuel consumption. As December approaches, northern India experiences colder weather, potentially reducing driving activity if foggy conditions arise. However, the year-end holidays are expected to support demand, including for jet fuel,” she explained.

Over January-October, India’s oil product demand rose 2.8 per cent Y-o-Y to 197.51 million tonne (MT), or 5.1 million barrels per day (mb/d).

Demand for diesel and gasoline rose 2 per cent Y-o-Y and 8.4 per cent Y-o-Y during the 10-month period while LPG and jet fuel demand grew by 6.8 per cent and 9.3 per cent, respectively, over the same period.

Crude oil futures settled higher on November 18 against a backdrop of potential escalation in Russia-Ukraine tensions. NYMEX December WTI settled $2.25 higher at $69.17 per barrel, and ICE January Brent climbed $2.26 to $73.30.

A geopolitical risk premium returned to the market November 18 amid reports that US President Joe Biden allowed Ukraine to use US-supplied long-range missiles to strike deep into Russia.

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