S&P Global Platts has cut India’s demand for oil and gas amid the second wave of Covid cases that have triggered lockdowns in key states in recent weeks. For 2021, he now sets oil demand growth at 350,000 barrels per day (b / d), against a forecast of 485,000 b / d made in February – which translates to a drop of nearly 28%. India’s city gas demand, Platts said, could drop 25 to 30 percent in the coming months.
“Since the dramatic escalation of new cases from mid-February to the end of February, we have downgraded India’s oil demand forecast by 135,000 bpd for 2021 – with a downward adjustment of 175 000 b / d for April, 760,000 b / d for May, 830,000 b / d for June and 360,000 b / d for July – down from a forecast of 485,000 b / d made in February ”, a said Kang WU, head of global demand analysis and Asia at S&P Global Platts.
However, once the lockdowns are lifted, Platts expects pent-up demand to be released, which in turn will act as a catalyst for economic growth and trigger a surge in demand for oil and gas in the country.
“April demand fell month over month, and we expect a further decline in May, but the recovery in the second half is still in sight. Oil demand in H2-2021 is expected to be 650,000 bpd higher than in the first half of 2021 (H1-2021), driven by a broader recovery in economic activity in a context of increasingly broad deployment vaccination, ”said WU.
Besides India, demand forecasts for 2021 have been revised downwards for Western Europe and Latin America due to more restrictions stemming from the second and third waves of Covid. Brent oil prices, WU said, will peak in mid-2021 at over $ 70 a barrel.
Globally, Platts expects global oil demand to grow 5.5 million bpd in 2021. “We expect strong sequential global oil demand growth over the month of over 8 million bpd. b / d from May to August, due to seasonal increases with the normalization of recent lows in demand, ”WU said.
However, for 2022, Platts has pegged global oil demand at 4.4 million bpd, 20% lower than in 2021. Upward revisions mainly concern the United States, Europe and China. . Overall, global demand will have returned to pre-pandemic levels in 2022, although the notable exception for depreciation will remain for aircraft fuels.
Fear of inflation
High commodity prices, including oil, analysts believe, are likely to stimulate inflation, which will be detrimental to India. Investors fear that a surge in inflation, especially in the United States, will force central banks to raise interest rates earlier than expected and trigger a flight of capital from emerging markets (EM), including the ‘India.
“Investors should prepare for the biggest fear of inflation since the early 1980s as pent-up demand kicks in as the US economy normalizes. However, the timing of the severity of the inflation fear will be determined by what happens with inflation expectations. And they have increased over the past week due to ‘shockingly’ weak employment data and the CPI inflation spike in April, ”wrote Christopher Wood, global head of strategy. shares at Jefferies in its latest weekly note to investors.