Flood-Hit India's Oil Demand Falls the Most in 14 Years

(Bloomberg) -- India’s oil consumption in August shrank 6.1 percent, the most since April 2003, as floods ravaged several parts of the country curbing demand for diesel and gasoline.

The world’s fastest growing oil consumer used 15.75 million tons of fuels in August, compared with 16.78 million tons a year ago, according to the oil ministry’s Petroleum Planning and Analysis Cell. Demand for diesel fell 3.7 percent to 5.9 million tons. The fuel accounts for about 40 percent of total oil product sales in the country.

“Severe flooding in parts of the country may have impeded freight and manufacturing activities causing overall demand to contract,” said  Nevyn Nah, a Singapore-based oil products analyst at Energy Aspects. “Also, demand growth was exceptionally strong in August last year resulting in a high base.” India’s oil demand grew 18 percent in August 2016.

Gasoline consumption in August fell 0.8 percent to 2.2 million tons, while demand for petroleum coke declined 29.3 percent to 1.9 million tons. This is the second time this year that India’s oil demand has fallen sharply. In January, it declined by 5.9 percent following the effects of Prime Minister Narendra Modi’s cash ban.

Kerosene usage shrunk by more than 41 percent during the month to 292,000 tons as the fuel continued to be replaced by liquefied petroleum gas for cooking.

Seasonal rainfall that caused floods in Assam, West Bengal, Bihar and Gujarat provinces led to a decline in transportation affecting demand for both gasoline and diesel. Heavy rainfall also caused a drop in usage of diesel-run pumps used to water farms.

Nah expects reconstruction activities to begin once floods subside, which will boost diesel demand from September onward.

India, expected to be the fastest-growing consumer through 2040 by the International Energy Agency, has seen its oil demand fall in four out of eight months this year. The country imports more than 80 percent of its crude requirement.

Additional consumption data for August:

LPG demand gained 12 percent to 2.06 million tons Naphtha consumption fell 7.6 percent to 1.06 million tons Bitumen usage increased 8.5 percent to 229,000 tons

To contact the reporters on this story: Saket Sundria in Mumbai at ssundria@bloomberg.net; Dhwani Pandya in Mumbai at dpandya11@bloomberg.net. To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net Alpana Sarma, Abhay Singh.

Copyright 2017 Bloomberg News.

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