India hasn’t left the pandemic behind, but its oil refineries have.
Three state processors, including Indian Oil Corp., the nation’s leading refiner, are currently operating at near 100% or more capacity, according to experts. Behind the recovery is strong demand for gasoline and liquefied petroleum gas as many choose to drive their own cars on public transit and cook at home to avoid restaurants.
The situation in the world’s No. 2 oil market follows a full recovery in top consumer China and underscores how Asian markets are leading the crude oil rally, even as vaccines offer hope for further recovery. The inequality of India’s recovery shares similarities with its neighbor’s revival – gasoline consumption in both countries rose as people returned to work – while demand for diesel in the still ailing South Asian economy lagged behind China’s.
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“As we near the introduction of Covid-19 vaccines as the fundamentals of the economy are strong, we see a rapid rebound in overall V-shape petroleum product consumption,” Shrikant Madhav Vaidya, chairman of Indian Oil, said in a statement .
In the first half of this month, Indian gasoline and LPG sales were up 10% year-on-year, according to preliminary data from the country’s three largest fuel retailers. Sales of diesel, the country’s most popular fuel, were 5% lower than the previous year, while aviation fuel use was halved.
The roaring refineries are in stark contrast to the situation in July, when lockdowns destroyed demand and resulted in excess fuel being diverted to onshore tanks and filled to the brim.
In contrast to China, where the recovery in demand followed a near-complete eradication of Covid-19, the Indian factories are back to full capacity before the disease goes away. While daily cases are falling, restrictions on public transportation and travel remain in place.
The strong demand for gasoline and the seemingly “endless” thirst for liquefied gas have made Mangalore Refinery and Petrochemicals Ltd. sufficient to operate your plant in South India to almost 100%. The runs are expected to rise above the capacity stated on the nameplate in January and the first quarter, said managing director M. Venkatesh.
Many Indian refineries can increase processing rates beyond capacity due to bottlenecks and expansion projects.
The Mangalore plant will process 1.3 million tons of crude oil in December, up from 1 million in November. Crude oil volumes are expected to rise to 1.4 million in January and February.
Strong auto sales and a surge in industrial and construction activity should also fuel demand, said Mukesh Kumar Surana, chairman of Hindustan Petroleum Corp. Refining runs at HPCL are currently over 100% and gasoline sales are growing at a pace of around 5%.
For Indian oil, crude oil throughput rose from 88% in the previous month to 100% of planned capacity in November and to 55% in early May, the company said in a statement. The total consumption of petroleum products was almost at the pre-Covid level last month. Sales of gasoline and liquefied petroleum gas increased compared to the previous year.