India is concerned about elevated crude prices, but oil marketing companies will take appropriate measures to cushion the impact for retail consumers if the trend persists for long, government and refinery officials said.
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Register NowOil Secretary Pankaj Jain said the government was closely monitoring crude prices as India imports around 85% of its oil needs.
Other government officials cautioned that any further upside in global crude prices would aggravate the pain for consumers, at a time when the country is gearing up for its general elections starting April 19.
"We expect global crude prices to remain rangebound in the near term," said an official at state-owned refiner Bharat Petroleum Corp. Ltd.
From the beginning of 2024 until end-March, Platts Dated Brent averaged $83/b, the same level for 2023 as a whole.
Based on an analysis of market fundamentals and sentiment along with other factors, S&P Global Commodity Insights forecasts Platts Dated Brent to average $85/b in 2024 in its base-case forecast.
"Despite the ample supply of oil, shipping route disruptions in the Red Sea is providing some sort of support to oil prices," said Kang Wu, global head of oil demand research at S&P Global.
The turbulence in the Red Sea region resulted in at least a $4/b difference between Brent crude and the Indian crude basket, said a top official of the state-owned integrated upstream company ONGC.
However, Indian government officials added that state-owned oil refiners do not normally tinker with fuel prices at the retail level. But they may adjust prices during a very high-cost environment to prevent any sharp blow to retail customers.
"We expect domestic retail fuel prices to remain stable in the next two months coinciding with the general elections," said an oil ministry official.
Gasoil in spotlight
There could be a surge in demand for diesel in the April-June quarter due to the election campaign, said an official working with the Petroleum Planning and Analysis Cell -- a research wing of the oil ministry.
In addition, diesel demand could receive support from the El Nino effect, in case the weather phenomenon prevails beyond May, causing a delay in the arrival of the southwest monsoon rains over the southern coast in 2024, the PPAC official said.
India's oil products demand in the January-February period rose 7% on the year to 39.76 million mt (5.2 million b/d), with demand for diesel and gasoline rising 4.8% and 9.3% from a year ago, respectively, PPAC data showed.
Gasoil demand is expected to remain elevated in Q1 and register a growth of 60,000 b/d on the year, according to S&P Global estimates. In Q2, it will likely seen an increase of 75,000 b/d on the back of harvest activity picking up, along with general elections in India. For 2024, gasoil is expected to be the largest contributor to oil demand growth.
Overall, India's oil demand is expected to grow by 206,000 b/d in 2024. Gasoil and gasoline will be the highest contributors, together accounting for 65% of the growth, S&P Global estimates showed.
Oil demand is holding up well and is expected to continue rising, supported by solid economic growth with more focus on industrial and construction activity along with the country's upcoming general elections in 2024, according to S&P Global.