Business

Plunging fuel demand amid COVID-19 lockdown has OMCs worried on all fronts

As only emergency service vehicles are on the roads, the demand for petrol has more than halved.

As only emergency service vehicles are on the roads, the demand for petrol has more than halved.   | Photo Credit: V. Raju

Except cooking gas, which registered a spike in demand due to panic buying after the lockdown, demand for all other fuels has dropped drastically.

National oil companies are staring at inventory losses as they have to bring down refinery throughputs because of the plunging demand for fuels following the nationwide lockdown to contain the deadly COVID-19 outbreak.

India is the world’s third-largest energy consumer, but the lockdown has shut businesses, suspended flights, stopped trains and brought almost the entire vehicular movement to a halt, impacting fuel demand.

 

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For the full the month of March, total retail volume has come down by 17%, led by a 26% dip in diesel demand and a 17% fall in petrol. Demand for aviation fuel is down by 33%, according to the national data shared by IOC on a year-on-year basis.

The only fuel that saw a demand spike in the month was cooking gas that, too, after panic buying since the national lockdown. Overall, LPG demand rose 1.7% in the month, according to the IOC data.

 

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There are 27.59 crore active LPG customers in the country.

All the national companies have seen a massive spurt in demand for the cooking fuel as people resorted to panic buying, leading to an average 40% rise in demand in the first week of the lockdown.

While the IOC, which controls more than 50% of the market, did not share its sales data, both BPCL and HPCL have said their diesel and petrol sales have fallen by over 55%.

 

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HPCL Chairman Mukesh Kumar Surana told PTI that the refinery throughput has come down to around 70%.

While the Vizag refinery is running at full capacity, the same at Mumbai is only around 80%, he said.

From the demand side, he said even though all the filling stations are open there is hardly any demand. While diesel demand is down 40% as trucks are off the roads, petrol demand has more than halved as people remain indoors because of the lockdown. Only emergency service vehicles are on the roads. There is practically no demand for ATF too, he said.

R. Ramachandran, the refinery director at BPCL has the same thing to narrate. While refineries are running at under 70%, from the demand side the story is more disappointing.

“Our diesel and petrol sales are down over 60% and there is virtually no demand for ATF as only a few cargo flights are operational,” he told PTI. However, he expects diesel demand to improve as more trucks come on to roads to deliver essential goods and e-commerce deliveries join them as the lockdown remains in force.

But the companies are fearing inventory losses due to the massive plunge in demand.

Though the company has only minimal inventory level, Mr. Ramachandran said losses are sure for the month and April and going forward if the lockdown extends .

However, HPCL chairman expressed confidence about managing inventory as he looks to export some fuel if the lockdown gets extended.

Mr. Surana also said that since HPCL is a net buyer of refined products, the company is regulating its throughput so that we can avoid shutdowns and the resultant inventory losses.

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Printable version | May 26, 2020 7:09:30 PM | https://www.thehindu.com/business/plunging-fuel-demand-amid-covid-19-lockdown-has-omcs-worried-on-all-fronts/article31279514.ece

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