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Diesel demand falls 7.4% in October partly due to economic slowdown

Accounting for a share of 40% of the country's total oil requirement, demand for diesel has reported to plunge 7.4% in October from a year ago which is the biggest monthly fall in three years. Economic slump, extended monsoon, auto sector slowdown...

ET Bureau|
Updated: Nov 16, 2019, 06.46 AM IST
Petrol sales up 8.9%, LPG demand jumps 14% and kerosene consumption falls 41%
New Delhi: Domestic demand for diesel fell 7.4% in October from a year ago, marking its biggest monthly fall in about three years. Analysts attributed the dip in part to sluggish economic activity during the festive season. Total demand for oil during the month was down by 1.4% from October of 2018.

Demand for diesel, which accounts for about 40% of the country’s oil requirement, appears to be crumbling due to a mix of economic slowdown, extended monsoon, sluggish vehicle sales, preference for petrol vehicles, increased availability of power, electrification of railways, and GST-induced efficiency in transport, according to analysts. The fuel’s demand had contracted 3.3% in September but had grown 1.1% in the six months to September.

Sale of petrol, which makes up about 15% of the total oil demand, rose 8.9% in October compared with 9.1% rise in the April-September period. Industry executives attribute strong petrol sales mainly to car buyers’ preference for petrol-powered vehicles.

During the month, demand for liquefied petroleum gas (LPG), mainly used for cooking in India, jumped 14% while that of polluting petcoke went up 30%.

India’s total oil demand had grown 1.4% in the first half of the current fiscal year, and was up 2.7% in the full year 2018-19.

Besides diesel, demand has dropped for naphtha (-17%), lubricants (-15%), and fuel oil (-15%) too, showing slower industrial activity.

Consumption of bitumen, mainly used for building roads, contracted 23% in October. But that for aviation fuel remained unchanged.

Kerosene consumption contracted 41%. Its demand has been falling sharply for the past few years as the Centre wants consumers to shift from the polluting fuel and has been cutting its allocation to states.

A falling demand for diesel has prompted state-run refiners to increasingly export the fuel.

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