Indian Crude Demand May Prevent Demand Growth From Falling To 800K/900K bpd

Macquarie's Vikas Dwivedi mentioned that robust Indian oil demand growth appears to be an "underappreciated factor" when considering global crude demand and "a source of growing consternation for demand bears."

India's oil product demand surged 440 K BPD, or 12.7 percent y/y, in January to 4.1 MM BPD. Moreover, the data is trending north, with demand rising by 250 K BPD y/y in November and by 330 K BPD y/y in December.

"If India comes in at +300, China at +350 and the US at +150, the ROW needs to produce 500 K BPD of demand growth to reach our global demand estimate of 1.3 MM BPD," analyst Vikas Dwivedi wrote. He added that if Indian demand rises above 200 K BPD, it would prevent total global demand growth from declining to 800 K BPD or even 900 K BPD, as several investors are fearing.

In the report Macquarie noted, "Importantly, in our view, India will continue to experience steady light ends (LPGs, naphtha, gasoline, jet fuel) demand growth irrespective of demand elasticity benefits and will be one of the bright spots, globally, for diesel demand growth."

The analyst said that India had reached an inflection point in new car sales in 2015, with per capita GDP reaching $4,000, "the threshold associated with an uptick in car ownership." India recorded over 3 million in new car sales, marking a 6.4 percent y/y jump, "supported by a surge in gasoline car sales."

Dwivedi explained that there is a shift in consumer preference from diesel to gasoline cars, since diesel subsidies have been removed. Gasoline car sales surged from 38 percent of total car sales in 2011 to 62 percent in 2015.