(S&P Global Platts) India’s crude imports in November reversed a declining trend to hit its highest level in 10 months as refiners build inventories in anticipation of higher runs, but analysts continued to keep a close eye on developments around the omicron variant of the coronavirus to see if it impacts inflows in the coming months.
As average run rates have risen to 100% across all Indian refineries, they are accelerating crude purchases on expectations of a sustained increase in demand for products, with demand for transport fuels such as gasoline having recovered to pre-pandemic levels.
India imported 18.37 million mt, or an average 4.5 million b/d of crude oil in November, up 7.5% month on month, latest provisional data from the country’s Petroleum Planning and Analysis Cell showed.
This reversed the three-month low for imports seen in October. India’s crude imports in November were also up 0.5% on the year.
“China and India will resume their front-line status in being the engines of growth in 2022, but Southeast Asia will also contribute substantially, especially in countries with high vaccination rates,” S&P Global Platts Analytics said.
Over January-November, India’s crude imports rose 5.8% year on year to 191.8 million mt, or 4.2 million b/d.
According to Platts analytics, India’s refinery runs are expected to rise by 370,000 b/d to 5.2 million b/d in 2022 amid strong domestic demand as economic activity gains steam and export demand rises.
A strong reversal
In 2020, India’s crude imports fell 10.3% year on year to 201.5 million mt, or 4 million b/d, on shrinkage in domestic fuel demand amid the pandemic-related lockdowns. For India, which meets 85% of its crude demand through imports, 2020 was the first year of negative oil demand growth in nearly two decades.
“India is mirroring the global trend, seeing its crude consumption hitting a 10-month high in November. It gives a clear indication that refining companies expect India’s oil demand to remain strong well into 2022,” said Rajat Kapoor, managing director for oil and gas at AWR Lloyd.
Indian refiners have been snapping up lighter crudes amid expectations that prices could remain at relatively higher levels in 2022.
“Refiners are expecting higher crude prices in 2022. They are putting together a crude sourcing strategy keeping in mind a price that would be on the higher side in comparison to 2021. There is consensus that the price would not hit a fresh low in 2022 due to fundamental reasons,” said an Indian oil ministry official.
As India’s mobility index rose from 215% in November to 226% in early December, analysts said they hope the impact of the omicron variant on December crude import volumes would be minimal as refiners would have committed purchases for December even before the news about the variant started to spread.
“Fuel demand in December is expected to rise as both petrol and diesel consumption for the first two weeks of the month were higher than the corresponding period last month. Gasoline consumption was up 7% and diesel up 18% from the first half of November given both personal mobility and economic activity have been steadily picking up over the past few months in India,” Kapoor said.
The omicron impact
The continued uncertainty over the latest wave of infections due to the omicron variant has unsettled oil markets, with several European countries limiting large public gatherings, enforcing stricter social distancing rules and encouraging people to work from home more, with further curtailments expected after Christmas celebrations.
“However, the spread of the virus is not that pronounced in India and stricter long lasting lockdowns are not expected here given the comparatively low severity and mortality rate associated with the omicron variant,” Kapoor added.
India’s refined oil product exports fell 2.9% month on month to 5.2 million mt, or 1.3 million b/d, in November, PPAC data showed. The decline in exports of refined products was driven by diesel sales, which fell amid Omicron-related concerns. Diesel exports fell 3.9% on the month in November.
Meanwhile, gasoline exports rose 3% on the month in November, while jet fuel exports rose 21.9% on the month in November, confirming the improvement in international air traffic. Exports of oil products were up 26.8% on the year in November.
In January-November, India’s oil product exports rose 3.2% on the year to 54.7 million mt, or 1.3 million b/d.
