COVID second wave and its impact on crude demand
The second wave of COVID in India has triggered lockdowns throughout the country, bringing the country close to a standstill once again. This has cast a shadow on India’s demand for crude. So, when will India's demand for a crude bounce back and how will this impact the global oil sector? To discuss this and more, CNBC-TV18’s Manisha Gupta spoke to Vikas Halan, Associate Managing Director at Moody's Investors Service; Sushant Gupta, Research Director of the Asia Pacific Region at Wook Mackenzie; and Kang Wu, Head of the Analytics Division in Asia at S&P Global Platts.
The second wave of COVID in India has triggered lockdowns throughout the country, bringing the country close to a standstill once again. This has cast a shadow on India’s demand for crude.
Tighter restrictions and a decline in aviation demand have compounded the issue, leaving fuel markets in a downward spiral.
The oil industry has witnessed a 20 percent decline in demand for diesel in April and this could further impact the sector since India’s diesel consumption accounts for 40 percent of the overall refined fuel sale.
The country's gasoline consumption has also witnessed a slump in the first half of April, and with this trend, the demand in the second half of the month is anticipated to fall further.
Being the world's third-largest importer of oil, the demand slump in India is seen as a cause of concern.
So, when will India's demand for a crude bounce back and how will this impact the global oil sector? To discuss this and more, CNBC-TV18’s Manisha Gupta spoke to Vikas Halan, Associate Managing Director at Moody's Investors Service; Sushant Gupta, Research Director of the Asia Pacific Region at Wook Mackenzie; and Kang Wu, Head of the Analytics Division in Asia at S&P Global Platts.
Sushant Gupta said, “If you look at the same time last year when India went for a 3-4 weeks nationwide lockdown, the historical numbers suggest that demand declined by roughly around 1.2 million barrels per day in Q2 of 2020 which is about 20-25 percent decline."
"Now we do expect the impact on demand for April, May, and June this year, but the impact we think will be less severe than last time.”
“We could see roughly around 10-20 percent decline in the month of April - very sharp decline followed by a slightly less decline towards May and June,” he added.
Vikas Halan said, “Lockdown has just begun so the impact is going to be assessed over the next few weeks. The impact last year started in March. We saw the bulk of the impact happening in the economic activity in mid-March to mid-May.”
“India, in March there was a consumption per day of about close to 5 million barrel a day and that is a very significant part of the global demand that was March and out of this clearly India imports nearly 90-95 percent so we are talking about close to 4 million barrels of demand from India in terms of import and if you assume that there is a 10-15 percent decline in consumption relative to March that is probably a little bit optimistic, it could be even more if they are no national lockdowns."
"So let us say you are talking about a million barrel per day of demand being taken off from the market and that could have an impact on the demand-supply balance, that could have an impact on OPEC making that decision to bring back certain supply and that would mean that 1 million-plus barrel of daily demand to be compensated by maybe going somewhere else to balance the market.”
Watch accompanying video for more.
(Edited by : Bivekananda Biswas)
First Published: Apr 27, 2021 4:47 PM IST
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