India's Covid crisis saps fuel demand

India's deadly second Covid-19 wave has brought an abrupt halt to its nascent recovery from the pandemic, with the resurgence expected to drag on fuel demand for weeks in a setback for the global oil market.

The combined consumption of diesel and gasoline in April is poised to plunge by as much as 20 per cent from a month earlier due to renewed restrictions, including a week-long lockdown in the capital New Delhi, according to officials from top refiners and fuel retailers. While major oil processors were still buying crude recently, there are signs starting to emerge that refining operations will likely need to be scaled back to adjust for plummeting demand.

"Given the grim situation, it's likely that the lockdowns could be in place for several weeks or even a couple of months," according to Senthil Kumaran, the Singapore-based head of South Asia oil at industry consultant FGE. "India's total key oil products demand will see a significant pullback."

India has repeatedly shattered records for infections and deaths as the virus sweeps through the nation, stoking fears that the central government may be forced to implement another national lockdown to curb the spread. Preliminary industry sales figures show a significant impact to fuel demand during the first half of April and expectations are that the situation will only get worse.

While demand for the motor fuel has been resilient during the pandemic as people shunned public transport in favor of their own cars and motorcycles to avoid infection, new advisories by state governments discouraging people from leaving their homes unless for emergencies or essential services are set to hurt consumption, the officials from the refiners and retailers said.

Nitin Goyal, who runs a filling station in New Delhi's bustling eastern district, said fuel sales dropped 90 per cent on Tuesday during the first day of the week-long lockdown in the city. He typically sells an average 10,000 liters of gasoline and diesel a day from his Indian Oil Corp - branded outlet and expects sales to recover to only about a quarter of usual volumes in the coming days. (Bloomberg)

Debjit Chakraborty, Saket Sundria