In its May Oil Market Report, the International Energy Agency (IEA) said that India's fuel demand would fall 8% in 2020, dragged by slowing economy and the COVID-19 pandemic. India's fuel demand is typically in line with its economic growth. However, the country's total fuel consumption was stagnant at 213.7 million tons in FY 2019-2020, although GDP grew by 4.2%.
Demand for diesel, which makes up more than 40% of India's fuel consumption, fell to 1.68 million bpd in 2019 from 1.71 million bpd in 2018. In contrast, gasoline consumption rose by 5.6% at 692,000 bpd over the same period but was 714,000 bpd lower than state forecast.
India's GDP is expected to contract by 5% in the current FY 2020-2021, rating agency Standard & Poor's said. Meanwhile, India's central bank has a more pessimistic view of a 6.8% contraction. However, an official with BPCL was optimistic that diesel use would improve as the government allowed the agriculture and trucking sectors to reopen. Meanwhile, another state-refiner official expected a 3% contraction in India's fuel demand if GDP shrank by 5%.
According to Standard & Poor's unit, Crisil, India's auto sales, an indicator for future fuel demand, are expected to see a double-digit decline in FY 2020-2021. Sales of passenger vehicles are expected to fall by 26%, commercial vehicles sales dropped 28%, and motorcycle sales will contract by 23%.
