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India’s 2023-24 fuel demand to grow by mid-single-digit: Fitch

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New Delhi [India] : Fitch Ratings expects India’s petroleum product demand in during 2023-24 to grow by a mid-single-digit percentage after a 10 per cent rise the past year.

The past year’s growth was aided by the post-pandemic pent-up demand. “Medium-term product demand growth is supported by Fitch’s expectation of 6-7 per cent GDP growth for India over the next few years, driven by the government’s increasing infrastructure spending and a pick-up in industrial activity,” Fitch said in a report titled ‘India Oil & Gas Monitor: FY23′.

It expects the Indian oil marketing companies’ (OMCs) marketing segment to turn profitable from 2023-24 after they incurred large losses in 2022-23 on high crude prices and unchanged retail fuel prices. “This should enable the OMCs to partly recoup the FY23 losses in 1HFY24 before the fall in crude prices in recent months is reflected in retail prices.” Crude oil prices are expected to moderate from the highs of 2022-23, but remain elevated, which, Fitch said, will support robust cash flow generation for upstream producers such as Oil and Natural Gas Corporation Limited (ONGC, BBB-/Stable) and Oil India Limited (OIL, BBB-/Stable) in 2023-24.

On India’s crude oil import dependence, Fitch said it will continue rising in 2023-24 due to strong demand for petroleum products and stable domestic crude oil output. India’s crude oil imports rose by 10 per cent in 202-23 and the reliance on imported crude increased to 87.3 per cent (85.5 per cent 2021-22) of total demand.

Russia’s share of Indian oil imports rose to 37 per cent by April 2023 from less than 2 per cent in March 2022, Fitch said, citing commodity data for the Harmonised System code 2709 as reported by India’s Department of Commerce. In the concluding part of the report, Fitch said it expects the oil marketing companies to continue dominating India’s fuel retailing market, given their large capacity expansion plans against the private sector.

The share of state-owned outlets in fuel retailing increased to 90.5 per cent in May 2023 from 89.9 per cent in March 2022. “We believe marketing losses, frozen retail fuel prices and elevated crude oil prices may have deterred private companies from expanding retail capacity during this period,” it added.

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