India & Indonesia Oil Demand in April 2012

Indian oil demand growth for February hit a strong 7.4% y-o-y. This was the largest rate of growth since November. Diesel oil demand grew the most, adding another 0.17 mb/d to the total diesel consumption pool. Diesel is the most consumed petroleum product in India, with consumption estimated at 1.6 mb/d. It is consumed not only by the industrial and transportation sectors, but also by the agricultural sector. Diesel usage accounts for 42% of total oil demand in India. Gasoline is also an important product consumed in India, totaling 0.38 mb/d. Naphtha demand grew robustly in February, resulting from increasing operations in the petrochemical industry.

Since mid-2010, India has deregulated retail prices for some petroleum products; however, companies cannot increase retail prices without government permission. Recently, the government has been hesitant to allow oil companies to pass on the hike in international oil prices to end-users. This move has been objected to by oil companies and is, to a certain degree, affecting oil demand positively. For 2012, India’s oil demand is expected to grow by 0.12 mb/d.

According to the Society of Indian Automobile Manufacturers, domestic passenger car sales increased by 13.1% in February y-o-y. This was the fourth consecutive month of growth and the highest rate for ten months. Discounts, lower interest rates, increased customer liquidity and generally improved sentiment were some of the factors behind these strong increases, which occurred despite high fuel prices.

Indonesia is the second-largest oil-consumer in ‘Other Asia’ after India and its consumption is growing. The country’s January oil demand grew by 3.4% y-o-y, averaging 1.2 mb/d. Diesel consumption was the largest contributor, averaging 0.45 mb/d in January. As for the year, Indonesian oil demand is forecast to inch up by 1.6% y-o-y. Given the healthy economies in most of Other Asia, this region’s oil demand growth is estimated at 0.2 mb/d y-o-y.