Petro product consumption growth moderates to 3.8%

Consumption growth of petroleum products moderates to 3.8 per cent in October 2011

According to the Petroleum Products Planning and Analysis Cell (PPAC), the consumption of petroleum products in India grew at 3.8 per cent in the month of Oct 2011, as a result of negative growth recorded in products like LPG, FO/LSHS, Lubes, Bitumen and others. The current set of data has come far below the robust 6.1 per cent growth in petro consumption seen in Sept 2011.

On a cumulative basis in the last 7 months (April-Oct), growth in petro product consumption has been marginally higher at 3.7 per cent as compared to 3.61 per cent in the April to Sep period in 2011. This is much lower than the growth that was witnessed in recent years and projections of 4.58 per cent made earlier this year. 

Last month, the PPAC maintained that the overall scenario in respect with consumption growth was pretty much in line with global trends, as demand was continuously revised down all leading international agencies (EIA, IEA and OPEC), each month this year. This was due to sluggish economic growth and macro-economic concerns in global economies.

Sale of diesel grew by 7.9 per cent in the month of Oct 2011 as against 9.8 per cent seen in Sept 2011. On a cumulative basis though, diesel consumption grew by a robust 6.2 per cent. Yet again, in a rare case scenario, consumption of diesel grew at a higher rate than petrol, which saw a growth rate of just 5.4 per cent in Oct 2011.

For the last 5 months, growth in petrol consumption has been lagging below the 6 per cent mark, as a result of high retail prices and shift in consumption demand to cheaper fuels - diesel and CNG. Another reason for this persistent slowdown can be attributed to the negative growth in sales, seen in passenger vehicles this year (between April-Oct).

LPG recorded one of the lowest growth rates at 1.6 per cent in Oct 2011 as against 10 per cent growth in Sept 2011. However, this wasn’t exactly due to lower consumption but lower dispatches by OMCs to their distributors on account of higher number of holidays in the month of October.

Since OMCs report their sales to LPG distributors and not actual sale of cylinders by distributors to their final consumers, the sales data has shown lower growth. While Domestic LPG recorded a 2.4% growth, non-domestic LPG consumption showed negative growth at 3.4% this month.

Naphtha recorded its highest monthly growth at 39 per cent after witnessing an 18 per cent growth in Sept 2011. On a cumulative basis, growth in Naphtha consumption stands at 8.2 per cent. This robust growth can be attributed to the low base effect as Naphtha consumption fell by 22% due to a shutdown in the Panipat petrochemical plant and rising demand from Petrochem and Fertilizer sectors, which have consumed 7.6% and 35.7% more Naphtha this year (Apr-Oct).

ATF consumption fell to 8.8 per cent in October from 11.8 per cent in Sep 2011, as a result of the turbulence seen in the aviation sector on account of cancellation of flights by certain airline operators.

Consumption of Bitumen de-grew by 2.1 per cent as against an increase of 11.2 per cent in Sept 2011, despite the withdrawal of the monsoon season. The main reason for this de-growth has been on account of the slowdown seen in road construction activity.

Petcoke consumption has recorded higher growth at 17% this year (till Oct 2011). This trend is likely to continue, as Essar Oil is expected to start selling its product in the last quarter of this year. However, private direct import of Petcoke declined significantly in 2010-11 due to higher availability from indigenous sources. 
       
In conclusion, the consumption of petroleum products is expected to remain muted owing to the sluggishness in economic activity. However with Nov 2011 auto sales showing some signs of a bounce back, one can expect the consumption of petrol and diesel to show some improvement in the short run. LPG consumption could also improve, with OMCs resuming dispatch to their distributors, post the holiday season.