Fuel demand fell sharply in May as lockdowns were imposed in many states to curb a surge in coronavirus cases, which has made India the second-most infected country behind the US. But the outbreak is slowing, with new cases now at about 128,000 a day – down from over 400,000 a day in early May.
“Things should recover quickly and there will be a festive season coming from August onwards, which is normally the demand pick-up period, followed by the agricultural season,” Surana said.
“I believe we should be able to pick up most of the demand in the second half of the year. As the system is not completely shut, my guess is recovery will be even sharper than last time,” he added.
India’s first wave of Covid-19 lockdowns last year slashed demand, sending total fuel consumption down by almost 50pc from pre-pandemic levels in April 2020. It then took until the end of the year for consumption to fully recover, with demand for all refinery fuels only exceeding the 2019 average of 18.1mn t/month in December, when demand hit 18.6mn t, according to oil ministry data.
The slump in demand has been less severe during the latest wave of Covid-19 cases, as the government has avoided imposing nationwide lockdowns despite a much heavier toll of infections and deaths. Demand for diesel, gasoline and jet fuel declined by 20pc, 19pc and 28pc respectively in May compared with April, according to the most recent data from state-controlled refiners that account for around 90pc of the country’s fuel sales.
Growth momentum
Surana remains bullish on longer-term growth prospects. “There is a consensus that oil demand will continue to grow around the world and more so in India,” he said. “Considering the size of the country, vast growth potential and the upswing in the economy, in spite of Covid, the momentum is there.”
And he expects oil to keep an important place in the energy basket, even as India seeks to address climate change. “I assume that alternative fuel, which may be coming into the picture, may replace a part of the additional incremental demand but [demand for] oil and gas will continue to grow for some time.”
HPCL did not cut refinery runs during the pandemic, unlike many of its rivals, as its market usually exceeds its output. The company is in the process of restarting one crude distillation unit (CDU) at its 150,000 b/d Mumbai refinery after a scheduled shutdown, while it will resume operations at the other CDU by the end of June or in early July.
The company’s 166,000 b/d Visakhapatnam (Vizag) refinery expansion is facing delays because of the Covid-19 pandemic. HPCL is hoping to complete the expansion that will take capacity to 300,000 b/d by March 2022, Surana said.
