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Wed 16 Oct 2019 04:40 PM

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Demand slump, lower Brent price pushes India's oil import bill down by 18%

India imports a major chunk of its crude requirement from the Middle East region, with Saudi Arabia and UAE being the second and fourth largest exporter of oil to India.

Demand slump, lower Brent price pushes India's oil import bill down by 18%

The slump in demand for petroleum products in India – world’s third largest consumer after US and China – has aggravated in September, with the country’s oil import bill tumbling by over 18 percent to $8.98 billion from $10.99 billion in the same month a year ago.

On a cumulative basis, India’s oil import bill has come down by 8.22 percent during April-September this year to $64.3 billion from $70.06 billion in the year ago period.

The slide in global Brent crude prices by about 21 percent last month compared to September 2018 price, no doubt, have helped in lowering of India’s oil import bill.

Though the lower oil import bill may be good news for officials in India’s finance ministry who keep a hawk eye on the country’s fiscal deficit, economists and industry experts are seeing the falling demand for petro products as symptomatic of the deepening of the slowdown in India’s economic growth in the recent months.

“The fall in India’s oil import bill has to be seen in a holistic manner and has to be read in line with the demand fall faced by various industries in India, especially the auto industry,” Amit Kumar, oil industry expert and Partner with PwC India, told Arabian Business.

“The auto sector has been seeing a major de-growth in the last several months, leading to sale of less number of cars, tractor sales have been on a downward spiral due to the continuing agrarian crisis and, of course, the overall industrial slow-down. All these meant that there was significant fall in demand for petrol, diesel and other petroleum products,” Kumar said, adding that the only positive is the fall in DG set use due to increasing availability of electricity.

India imports a major chunk of its crude requirement from the Middle East region, with Saudi Arabia and UAE being the second and fourth largest exporter of oil to India.

Industry analysts said though the current fall in demand in India may not have any impact on global crude prices, a sustained fall in crude demand by India could raise concerns for major oil exporters.

“The fall in demand for oil imports bill in the recent months, apart from the fall in demand for petro products in India, was also because of the lower global Brent prices. However, if the slump (for petro products) sustains on a continues basis in India, which is among the top oil consuming countries, it will be a matter of concern for oil exporting countries in the Middle East and elsewhere,” Tsunduru Muralidhar, a leading independent oil sector consultant, told Arabian Business.

“Oil being the major input for all industries, besides for vehicles, gen sets and agriculture, the current economic slowdown would continue to lead to fall in demand for petro products,” Muralidhar added.

According to the latest trade data released by the government, besides oil import, India’s non-oil import has also been witnessing a fall in the recent months, reflecting the demand slump in the country’s economy.

While India’s non-oil imports in September 2019 was down by 12.3 percent to $27.91billion from the corresponding month of last year, it was down by 6.57 percent during April-September this year $178.97 billion, compared to $191.57 billion in the year ago period.