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UBS Investment Research
India Oil and Gas Sector
I ndia oil monthly: Issue 11
Monthly oil demand growth slows down
Based on Reuters and PPAC data, India’s oil product demand rose 1.9% YoY to
2.96mbpd in June’11. The growth in demand was affected by hoarding of diesel
stocks by dealers ahead of the price hike last month. FY12 (YTD) product demand
has grown 3.7% over same period last year.
Diesel sales reverse post over stocking in previous month
Oil product demand grew by its slowest pace since Nov’10. Demand for auto fuels
turned sluggish as price increase trimmed demand. Diesel demand grew by 2.9%
YoY in June vs. 10.9% growth last month. Diesel sales fell 8.9% MoM. Gasoline
demand grew 0.6% YoY and fell 7.4% MoM. We believe lower diesel demand is
mainly due to higher dealer inventory in May ahead of the June price hike as well
as a slowdown. However, lower gasoline demand reflects the impact of rising
prices and slowdown in consumer spend. LPG demand was dented by the recent
increase in price. Jet fuel demand grew fastest by 9.7% YoY.
Oil demand rose 5.0% YoY in May’11
Oil demand rose 5.0% YoY in May 2011 versus an increase of 1.9% in June. In
May, YoY gasoline and diesel demand had risen 7.8% and 10.9% compared with
0.6% and 2.9%, respectively, in June. So far in FY12, out of total oil demand,
diesel and gasoline account for 44% and 11%, respectively.
We expect demand growth to be 4.6% in FY12
We expect consumer demand to drive an 8% growth in gasoline in FY11-14. While
diesel demand may grow at 5% on the back of agricultural and industrial growth.
Statement of Risk
Changes to our outlook on the global economy as well as foreign exchange rates
can have a material impact on our outlook for global oil prices, refining margins
and petrochemical spreads. Oil prices, refining margins and petrochemical
spreads are highly seasonal, which can sometimes lead to volatile earnings in the
sector from quarter to quarter. For India, government regulatory changes affect
the oil sector, for example downstream price controls and taxes, can pose a risk
to our outlook. Timing and execution risks exist for all upstream and
downstream projects. Mechanical failure is also a risk for downstream assets.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
India Oil and Gas Sector
I ndia oil monthly: Issue 11
Monthly oil demand growth slows down
Based on Reuters and PPAC data, India’s oil product demand rose 1.9% YoY to
2.96mbpd in June’11. The growth in demand was affected by hoarding of diesel
stocks by dealers ahead of the price hike last month. FY12 (YTD) product demand
has grown 3.7% over same period last year.
Diesel sales reverse post over stocking in previous month
Oil product demand grew by its slowest pace since Nov’10. Demand for auto fuels
turned sluggish as price increase trimmed demand. Diesel demand grew by 2.9%
YoY in June vs. 10.9% growth last month. Diesel sales fell 8.9% MoM. Gasoline
demand grew 0.6% YoY and fell 7.4% MoM. We believe lower diesel demand is
mainly due to higher dealer inventory in May ahead of the June price hike as well
as a slowdown. However, lower gasoline demand reflects the impact of rising
prices and slowdown in consumer spend. LPG demand was dented by the recent
increase in price. Jet fuel demand grew fastest by 9.7% YoY.
Oil demand rose 5.0% YoY in May’11
Oil demand rose 5.0% YoY in May 2011 versus an increase of 1.9% in June. In
May, YoY gasoline and diesel demand had risen 7.8% and 10.9% compared with
0.6% and 2.9%, respectively, in June. So far in FY12, out of total oil demand,
diesel and gasoline account for 44% and 11%, respectively.
We expect demand growth to be 4.6% in FY12
We expect consumer demand to drive an 8% growth in gasoline in FY11-14. While
diesel demand may grow at 5% on the back of agricultural and industrial growth.
Statement of Risk
Changes to our outlook on the global economy as well as foreign exchange rates
can have a material impact on our outlook for global oil prices, refining margins
and petrochemical spreads. Oil prices, refining margins and petrochemical
spreads are highly seasonal, which can sometimes lead to volatile earnings in the
sector from quarter to quarter. For India, government regulatory changes affect
the oil sector, for example downstream price controls and taxes, can pose a risk
to our outlook. Timing and execution risks exist for all upstream and
downstream projects. Mechanical failure is also a risk for downstream assets.
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