India’s oil imports in May and crude deliveries expected to experience the full impact of the pandemic

Strong points

Crude will drop further in May from April levels: Platts Analytics

Refiners largely shipped most of their April crude commitments

Analysts believe sustained recovery in economic activity likely after June

India’s crude imports and refining operations remained robust in April, with refiners shipping cargo that contracted earlier and refraining from backing off deals despite a second wave of COVID-19 that triggered fears of destruction of demand. Analysts, however, said the full impact of the crisis would only be reflected in the May numbers.

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Although India started to witness recorded cases of COVID-19 in early April, the number of regional lockdowns only started to increase towards the end of the month and early May, while the country remained away from a national lockdown. As a result, refiners have met all of their April import commitments, analysts said.

“Just like last year, Indian refiners were slow to respond as crudes were purchased in advance. There was also uncertainty about weak demand as different states took restrictive measures. variables to contain the spread of the coronavirus, “said Lim Jit Yang, adviser. for the Asia-Pacific oil markets at S&P Global Platts Analytics.

“But as they have started to realize the severity of the impact on demand from the foreclosure measures, they are expected to cut back on shopping and some have already done so because first half sales in May were very weak,” said he added.

India imported 18.26 million tonnes of crude in April, an average of 4.5 million b / d, up 10.3% year-on-year, provisional data from the Planning Unit showed. and the country’s oil analysis, or cMYP, reflecting a weaker base in the year – a month ago when India was under a nationwide lockdown. Imports in April were virtually unchanged from March levels.

For the January-April period, India’s crude imports fell 2.3% year on year to 73.12 million tonnes, or 4.5 million bpd. In 2020, India’s crude imports fell 10.3% year on year to 201.5 million tonnes, or 4 million b / d, according to the cMYP.

Crude operates under pressure

India’s demand for petroleum products fell 9.4% to 17 million tonnes in April from March volumes, and demand in May is expected to decline further month-over-month, analysts say .

The average yield of refineries in India was 97% in April compared to 99% in March, according to the latest survey by the country’s petroleum ministry. However, execution rates were about 72% higher a year earlier.

In April, state-owned refineries returned 98%, down from 61% a year earlier and 106% in March. The flagship state refiner Indian Oil Corp., or IOC, recorded an average of 104% combined production for all of its nine stand-alone refineries in April, up from 53% a year earlier and 100% in March. .

Indian refiners processed 19.88 million tonnes of crude oil in April, an average of 4.86 million bpd, up 34.86% on the year. April’s figure was 5.24% below March levels.

Analysts said refining operations in May could decline further.

“Refiners in India have had to cut utilization rates as demand hit the domestic market following the latest wave of COVID-19. May figures are expected to show greater impact on refining operations because this is the month when daily COVID-19 cases peaked, ”ING Economics said in a research note.

The market has a better idea of ​​the impact of the latest wave of COVID-19 on domestic demand for oil, with IOC saying its gasoline and diesel sales have fallen by around 15% to 20% due to the last wave.

Sustained recovery observed after June

India’s oil demand is expected to grow by 260,000 b / d over one year in the first half of 2021 and 390,000 b / d over one year in the second half. Demand in H2 will be 700,000 bpd higher than that in H1, driven by a wider recovery in economic activity in a context of increasingly widespread deployment of vaccination. Platts Analytics expects India’s oil demand in 2021 to remain below 2019 level, mainly due to a weak first half, with annual growth of 325,000 bpd in 2020.

The Nomura India Resumption to Activity Index, or NIBRI, fell to 60 for the week ending May 23, from 63 the week before. He is now at levels last seen in June 2020, having fully recovered in February.

“Both mobility and non-mobility sectors have been affected. The continued sharp decline in NIBRI confirms our view that the most affected activity will occur in May. For a sustained recovery, the pace of vaccination must also accelerate, which we predict will happen after June, ”Nomura said.

Oxford Economics said it had downgraded its 2021 economic growth forecast for India to 9.1%, from 10.2% earlier.

“International experience suggests that tighter restrictions will need to remain in place until at least 28% of the population has received a dose of the vaccine to contain the risks of a further increase in cases. We estimate that the ‘India will reach the vaccination threshold by mid- to the end of August, and therefore restrictions are expected to be extended in the third quarter, ”said Priyanka Kishore, India division manager. and South East Asia at Oxford Economics.

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