Industry Trend Analysis - Fuels Demand Upgraded But Risks Remain - JUNE 2017

BMI View : Robust economic growth and rap id vehicles sales will underpin India's expanding fuels demand, which we have upgraded given the impressive growth in 2016 . We are particularly constructive on gasoline, LPG and naphtha demand growth.

We have upgraded India's fuels consumption given the most recent data available from the Indian Petroleum Planning & Analysis Cell (PPAC). Full year data from the government agency shows that Indian fuels consumption exceeded our expectation, rising by an impressive 10.7% year-on-year. The strength of 2016 figures gives us cause to adjust India's consumption forecast upwards over the coming years, considering India's strong fundamentals.

We have bumped up our forecast for India's fuel demand in 2017 to 7.8% taking the average yearly consumption from 4.54mn barrels per day (b/d) to 4.69mn b/d. Furthermore, we expect this impressive growth to continue throughout our forecast period, albeit at a slower rate in percentage growth terms. From 2016-2026 we forecast India's thirst for fuel to rise by 3.31mn b/d, which is more than double the UK's total fuel consumption in 2016. We are constructive on a broad basket of fuels demand, most notably gasoline, LPG and naphtha. LPG demand is looking strong given the government initiatives to stimulate LPG penetration in rural areas through an expansion of LPG dealerships, while naphtha demand will continue to excel given the expansion of petrochemical facilities.

India To Remain A Key Driver Of Global Demand
Indian Fuel Consumption Forecast
e/f= BMI estimate/ forecast. Source: PPAC, BMI

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