India's March Fuel Demand Hits 3-yr High, Petrol Sales At All-Time Peak

India's fuel demand rose to a three-year high in March, with petrol sales hitting an all-time peak, as the market accumulated supplies foreseeing price spikes, despite which the outlook for the country's post-pandemic economic recovery remains promising. 

Consumption of fuel, a proxy for oil demand, rose 4.2% from the same month last year to 19.41 million tonnes, its highest since March 2019, according to the country's oil ministry's Petroleum Planning and Analysis Cell data as on April 9.

"March oil demand was strongly supported by stockpiling activity/hoarding in anticipation of a rise in petrol and diesel prices in the later part of the month," UBS analyst Giovanni Staunovo said. 

Preliminary data this month showed Indian state refiners' gasoil and gasoline sales in March surged on increased demand from dealers and consumers ahead of an expected sharp rise in retail prices after elections in key states.

"So this (higher prices) likely will weigh on demand prospects in the near term, but with the economy still expanding, oil demand is likely to continue recovering over the coming months," Staunovo said. 

Sales of gasoline, or petrol, were 6.2% higher from a year earlier at 2.91 million tonnes, their highest ever as per data going back to 1998.

To mitigate the rising cost of oil imports, India has turned to Russian barrels that are available at a deep discount citing "national interests". 

Indian refiners have bought at least 16 million barrels of cheaper Russian oil for May loading on a delivered basis, similar to purchases for the whole of 2021, according to Reuters calculations as of last week. 

While imports of Russian oil have kept India's economy, emerging from its pandemic slowdown, on track, "India is also needing to tread carefully politically," said Jeffrey Halley, chief market analyst at OANDA.

DOMESTIC SALES (in million tonnes):

NOTE: Total figures may not tally because not all items are included in the table, and numbers are rounded. The numbers for previous months may have been revised.

 (Reporting by Bharat Govind Gautam in Bengaluru; Editing by Christopher Cushing, Sherry Jacob-Phillips and Uttaresh.)

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