NEW DELHI (Reuters) - India’s fuel demand growth could return to normal levels by mid-May as the nation takes steps to end a lockdown aimed at stemming the spread of COVID-19, oil minister Dharmendra Pradhan said, helping refiners hit by severe inventory losses.
Fuel demand growth in India, the world’s third-biggest oil importer and consumer, plunged to historic lows in April, provisional data shows, as the country’s eight-week long lockdown hit economic and industrial activity.
“Since last two week there is a gradual increase in the demand, very slow ... but we are confident by middle of May we will be moving towards the normal position. That’s our calculation,” Pradhan told IHS Markit’s CERAWeek conversations.
Falling fuel demand has reduced crude processing by refiners, who are facing storage constraints at a time when lower cracks in overseas markets have made exports unattractive.
Pradhan said the slump in global oil prices, together with with falling fuel demand, would lead to inventory losses for refiners. Refiners had to defer some oil cargoes due to the fall in local demand, he added.
“Our refiners are facing severe inventory loss because all of our purchases from February, March, and April, prices are not what they are today. So we have to pay the whole price. It’s a double burden. There’s a market loss and an inventory loss for our oil companies,” he said.
Reliance Industries Ltd, operator of the world’s biggest refining complex, suffered its worst profit in 11 years in the March quarter due to tumbling oil prices.
Indian refiners would report inventory losses of more than 250 billion rupees ($3.3 billion) in the January-March quarter after the 70% fall in oil prices, Crisil Rating, a unit of Standard and Poor’s, said in a recent report.
India has announced a series of steps to help industries facing low demand and liquidity problems.
“More thing will come up in near future and looking at all such things I am expecting a demand growth,” Pradhan said. “We will not face major problems to maintain our targets that we had decided in the beginning of the financial year 2020-21.”
Reporting by Nidhi Verma; editing by Richard Pullin