Record Covid surge adds to Indian fuel demand pressure

India's Covid-19 cases have risen by over 300,000 in the last day, the highest one-day surge anywhere in the world since the start of the pandemic, increasing pressure on the country's fuel demand.

The increase, which takes the total number of cases in the world's third-biggest oil consumer to almost 16mn, is threating to further disrupt economic activity and hit fuel use.

Driving activity across the country has fallen by nearly 10pc since 12 April and is now 24pc below a 13 January 2020 baseline, pressuring motor fuel consumption, mobility data from US technology firm Apple. Activity in April so far is still 8pc above the 2020 baseline but heading lower.

Some port operations have slowed because of coronavirus infections, leading to longer waiting times for vessel discharges, market participants said. Labour shortages are also emerging as people fall sick or return to their hometowns, although the impact so far seems less severe than during India's first Covid-19 outbreak a year ago — despite much higher case numbers this time around.

India's diesel, gasoline, jet fuel and LPG demand declined in the first half of April because of the surge in cases, the most recent data from state-controlled refiners show.

But refiners are largely maintaining run rates amid ample storage availability. India's biggest refiner, state-controlled IOC, is operating at nearly full capacity and only smaller refiner MRPL has made any significant run cuts, market participants said. But refiners may have to start cutting runs by 10pc if lockdowns in Delhi and Mumbai continue in May, according to industry officials.

Refiners may need to export some of their output if storage capacity fills up and run rates are not cut, consultants Energy Aspects said. Oil demand is likely to fall by almost 600,000 b/d or 12pc this month from March, with gasoline and diesel demand dropping by 13.5pc and 12.7pc respectively in the same comparison, it said.

By Sathya Narayanan