New Delhi Dec. 1: India’s domestic refined oil product sales fell in October for the first time in 17 months as slowing economic activity crimped demand for industrial fuels and diesel, government data showed on Monday. The drop in consumption stands in contrast to rival China, where apparent oil demand grew 4.3 per cent in October, edging up from 2.26 per cent in the previous month. Oil product sales in India, a proxy for demand, fell 1.7 per cent from the same month a year ago to 10.71 million tonnes as diesel consumption slowed to its lowest level since June, when India raised auto fuel prices by up to 10 per cent.
“Demand for most of the industrial fuels has reduced, which is a reflection of the state of the economy,” said an oil ministry official, who could not be named. India’s economy expanded 7.6 per cent in the September quarter, slower than 7.9 per cent in the quarter before and far below the nine per cent seen in fiscal year 2007-08. According to a Reuters poll, world oil demand is set to shrink this year for the first time since the early 1980s, when prices surged after the 1979 Iranian revolution. The International Monetary Fund has revised downwards its 2009 economic growth prognosis for India to 6.3 per cent from 6.9 per cent, but the International Energy Agency in its latest report said growth in demand for transport fuels and and hence oil would continue.
India’s annual petrol sales in October were up 10.1 per cent to 936,500 tonnes.
Diesel sales in Asia’s third-largest oil consumer grew an annual 6.4 per cent to 4.24 million tonnes, compared with double-digit growth recorded in the previous month, on lower offtake by industrial users. Diesel demand is expected to ease over the next few months due to lower prices of alternative fuels naphtha and fuel oil. A possible cut in retail fuel prices, that have remained unchanged since June despite tumbling crude prices, may increase sales. The oil minister has said the government may consider cutting prices after elections in some Indian states are completed by December 24. India’s naphtha consumption declined 10.5 per cent, mainly due to lower demand from India’s top firm, Reliance Industries, for its petrochemical plants.
Naphtha is hit by weak demand from the petrochemical industry, affected by low ethylene prices due to the global economic slump and weak demand for plastics.
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