India's petrol and diesel consumption falls as monsoon fury disrupts infra, travel, agriculture

India's petrol and diesel demand fell in the first half of July, as the monsoon changed travel plans and cut demand in the agriculture and infrastructure sectors, as per to early data from the industry.

The monsoon, which typically brings heavy rains to India between June and September, has led to flooding in some parts of the country and disrupted travel. This has led to a decline in demand for petrol and diesel, which are used for transportation. Furthermore, infrastructure projects also tend to slow down during the monsoon season. In addition, the monsoon has also led to a decline in demand for diesel in the agriculture sector.

Demand for diesel, which is the most used fuel in the country, making up about two-fifths of the total demand, fell 15% from July 1–15 of this year to 2.96 million metric tonnes, the news agency PTI reported on Monday.

In April and May, diesel use went up by 6.7% and 9.3%, respectively, as farming picked up, and cars turned on their air conditioners to beat the summer heat. Since the middle of June, when the monsoon started, diesel usage has gone down. When compared to the 3.68 million metric tonnes of diesel that were used from June 1–15, sales dropped almost 20% from month to month.

During the first half of July 2023, sales of petrol were 1.25 million metric tonnes, down 10.5% from the same time last year. The data showed that sales went down 10.8% from one month to the next.

According to industry estimates, India's oil demand is expected to rise by 0.2 million barrels per day this year.

OMCs: Sharp turnaround in fortunes

ICICI Securities, an analyst research firm, stated in an update that moderation in both crude costs and softer product prices is likely to benefit oil marketing companies (OMC) marketing earnings in Q1 FY24. Marketing margins, after showing steep losses over H1FY23, have steadily recovered over the last 4 months. The agency expects petrol and diesel margins to be at a stellar level of Rs 8–9 per litre during Q1 FY24. In addition to it, the OMCs are likely to earn a GRM (gross refining margin) of US$ 7.7–9 bbl arising out of windfall tax, inventory loss, and Russian crude cost benefits.