Russell: India, Not China, Powering Growth in Fuel Demand

(The opinions expressed here are those of the author, a columnist for Reuters.)

LAUNCESTON, Australia, Nov 19 (Reuters) -- China's fuel usage tends to gather headlines as an indicator of the strength of global crude oil demand, and while this has been justified, the real growth action is happening over the Himalayas in India.

India's total demand for oil products is about one one-third of that in China, but the South Asian nation is powering up as China's growth moderates.

This isn't entirely unexpected given that the slowdown in China's economic growth is well known, as is the rotation towards a more service- and consumer-oriented economy from one reliant on heavy industry.

India's rapid gains in fuel consumption have seen it overtake Japan to become Asia's second-largest crude oil importer behind China, and this growth trend appears likely to continue.

India's fuel demand in October grew at its fastest pace in almost 12 years, rising 17.5 percent from the same month a year earlier, according to data from the Petroleum Planning and Analysis Cell, a unit of the oil ministry.

Total consumption of refined oil products was 15.2 million tonnes, which equates roughly to 3.6 million barrels per day (bpd).

This is using a conservative conversion rate, the crude oil factor of 7.3 barrels per tonne, while the factors for the main products India consumes, diesel and gasoline, are 7.5 and 8.5, respectively.

If the pace of fuel demand growth for the first seven months of India's April to March fiscal year is maintained, it puts the nation on track for consumption of at least 3.6 million bpd for the 2015-16 year.

If this is achieved, it will mean that India's fuel demand growth was 8.7 percent higher in 2015-16 over the prior year, equivalent to a gain of about 290,000 bpd.

China's apparent oil demand was 10.14 million bpd in October, a gain of 0.9 percent from the same month a year earlier, but only 0.1 percent higher than in September.

Detailed figures for October aren't yet available, but it's likely that the apparent demand number will be below the moving 12-month average, which stood at 10.67 million bpd in September.

Assuming China's apparent demand for the whole of 2015 comes in around 10.6 million barrels, this represents a gain of about 5.9 percent over 2014's 10.06 million bpd.

China Storage Distorts But it's here that one runs into difficulty with China's fuel figures, as apparent demand is a derived number that doesn't include changes in inventory levels, data which isn't disclosed by the authorities.

China has been filling strategic and commercial storage sites, and looking at the difference between crude available from domestic output and imports and what's processed through refineries shows that at least 200,000 bpd appears to have headed into oil tanks so far this year.

This would cut China's actual rise in fuel consumption to something closer to 4 percent, or a growth rate of less than half what India is likely to achieve in the 2015-16 fiscal year.

China's fuel consumption growth has been on a declining trend since hitting more than 11 percent in 2010. In 2012, apparent demand was up 4.5 percent on year, in 2013 by 1.6 percent and by 3 percent in 2014.

It's worth noting that 2014 was, much like this year, boosted by rising storage flows.

In contrast, India's fuel demand has grown strongly, with likely 2015-16 consumption of 3.6 million bpd about 8.7 percent higher than that in 2014-15, and some 14 percent above what it was in the 2013-14 fiscal year.

Put another way, India's fuel demand has grown by 440,000 bpd since the 2013-14 fiscal year, while China's has expanded by about 810,000 bpd from 2013 to the current calendar year.

While India's growth in volumes since 2013 is just over half China's, in percentage terms it's almost double the pace.

With India's government pushing for more rapid urbanisation and industrialisation, in contrast to China's move to a consumer-driven economy, this trend of faster fuel demand growth is likely to continue, and possibly accelerate.

It's too early to say China has had its day in the sun as far as oil demand goes, but it's increasingly clear that India has well and truly stepped out of the shade.

(Editing by Tom Hogue)

Energy Prices
INDEX	PRICE	%	TIME(EDT)
WTI Crude	$85.60	+0.22	11:24 AM
Brent Crude	$90.25	+0.17	11:24 AM
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April 16, 2024 11:38 AM EDT

Russell: India, Not China, Powering Growth in Fuel Demand

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