India's petroleum product demand on track for growth in FY24

February 09, 2024 (MLN): India's demand for petroleum products is likely to increase by a mid-single-digit percentage in the financial year ending March 2024 (FY24), following a 5% YoY rise in 9MFY24 and a 10% post-pandemic recovery in FY23, Fitch Ratings says.

Both petrol and diesel sales recorded robust 4%-6% increases in 9MFY24, fueled by heightened economic activities in the agriculture and power sectors, coupled with a surge in holiday travel and auto sales.

Fitch expects Indian refiners’ gross refining margins (GRM) to moderate during FY25 from the strong levels expected in FY24, but remain above mid-cycle levels.

By FY26, we foresee a shift closer to mid-cycle levels, but remaining resilient, bolstered by the escalating demand for end-products.

The gradual normalization of the crude supply mix away from Russian imports is likely to narrow GRMs, although we expect margins to stay strong, supported by the rising demand for end-products.

In the upstream segment, domestic oil and gas production has modestly increased, driven by a 5% rise in gas production in 9MFY24.

Fitch expects production to continue to rise moderately as technological investments in enhanced oil recovery techniques will offset natural declines.

Fitch forecasts the oil and gas sector's high capex intensity to continue in the medium term, particularly with upstream companies investing in production enhancement.

In the downstream segment, Hindustan Petroleum Corporation Limited (BBB-/Stable) should maintain higher capex due to planned investments by its subsidiary, HPCL Rajasthan Refinery Limited.

The CAPEX of other oil marketing companies, including HPCL-Mittal Energy Limited (BB/Positive), should be minimal as they have completed their expansion projects.'

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