India expects fuel demand to get back to pre-virus levels by the end of 2021 as the world’s third-biggest oil consumer emerges from the clutches of the Covid-19 pandemic.
“There are signs of demand resurgence due to lifting of lockdowns and gradual pickup in economy,” India’s Oil Minister Dharmendra Pradhan told Bloomberg New Energy Finance’s Ashish Sethia at the BNEF Summit held virtually on Tuesday. “We are confident by the end of the year, we will be in a very robust position to restore our original consumption behavior.”
The brutal Covid-19 wave that sweep across India during April-May overwhelmed its healthcare infrastructure and triggered localized lockdowns, battering sales of diesel and gasoline — which account for more than half of nationwide oil consumption — by about 30% of pre-virus totals in 2019. Daily infections have since dropped and fuel sales rebounded since the beginning of June, offering support to the bullish narrative to global energy demand.
Brent crude, the global benchmark, has rallied more than 40% this year, and some of world’s biggest oil companies and leading traders predicting a price of $100 a barrel.
India, which imports more than 80% of its oil, is facing the price pressures, that could threaten the nascent demand recovery in what was considered the center of global oil demand growth prior to the pandemic.
“Today’s prices are very challenging one and I’m persuading my producer friends,” Pradhan said. “I hope the prices will be little bit sober, that’s our expectation.”
OPEC and its allies will meet on Thursday to consider restoring some of the shuttered production cautiously as the market remains fragile from Covid mutations.
Combined effects of rising oil prices and numerous tax hikes over the past few years have ratcheted up fuel costs at Indian pumps to record levels across the country, which could weigh on the return to normalcy in consumption.
Higher oil prices are also adding more impetus to India’s push for newer oil suppliers and cleaner energy sources.
“Wherever I will get competitive oil price, with our global diplomatic framework, I will opt for that,” the minister said, when asked if India would import Iranian crude when sanctions are lifted. “Affordability is primary thing for me.”