As oil market bulls pin their hopes on rising demand for crude in India to support benchmark futures prices, the country certainly hasn’t disappointed, if the latest available data is anything to go by.
The burgeoning economy, which recently overtook Japan, to be the world’s third-biggest oil importing nation after the China and the U.S., took in a record 4.93 million oil barrels per day (bpd) in January from the global markets, according to ship tracking and market data published by Thomson Reuters Oil Research & Forecasts on Thursday (February 15).
Commenting on its own data assessment, the global newswire’s research outfit noted the said figure amounted to a 13.6% rise for the same month on an annualized basis, and a month-over-month rise of 12.5%.
While India is attempting to boost domestic exploration and production, it currently imports 81% of its oil requirements, and has of late started building a strategic petroleum reserve of its own.
The Indian government recently noted that its annual fuel demand rose 10.3% in January, with the consumption of diesel and gasoline rising in double digits. Furthermore, in order to boost manufacturing, India has set a 2030 target of boosting its refining capacity by 77% to 8.8 million bpd.
In its recent annual budget, New Delhi assumed an 11.5% nominal GDP growth for fiscal year 2018-19, which if met, could mean even higher demand for crude oil from India.
Many market commentators seem to support that viewpoint. In a recent note to its clients, ratings agency Fitch opined that India has the "highest medium-term growth potential among the largest emerging markets" it has recently researched, including economies such as China, Indonesia, Brazil, Mexico, South Africa, South Korea and Turkey.
“India in particular, but also Indonesia, Mexico, Turkey and Brazil are set to see continued robust growth in the working-age population in the next five years, bolstering GDP growth potential. In contrast, in Russia, Poland, China and South Korea headwinds from deteriorating demographics will sharpen and weigh on growth,” wrote Brian Coulton, Chief Economist at Fitch Ratings.
Capital accumulation and investment also have a crucial role in boosting GDP growth, Coulton added.
Nevertheless, Fitch Ratings' base forecast remains that the Brent price will stabilize in the $50-$60 per barrel range, as U.S. shale production is set to increase further, so oil bears have plenty to chew on too.
