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Indian oil product demand has slowed over the past two years, and we
expect the trend to continue, based on recent datapoints. With new
capacities coming onstream, Indian refiners will need to increase exports
to sustain utilization levels, in our view.
Product demand has been slowing…: India’s oil consumption has
slowed over the last three fiscal years, with annual growth slowing to
c.3% from c.7% earlier. However, auto fuels – gasoline and gasoil –
have continued to grow at fairly robust rates, with declines in kerosene,
naphtha leading the growth down. Recent data points on consumption of
petroleum products (Aug-11, source: Infraline) reinforce a trend of
slowing growth (1.8% in August), led by a deceleration in kerosene,
petrol, and diesel. With slower automobile sales, we expect auto fuel
consumption growth to continue on a low growth trajectory. We expect
India’s oil demand growth to be c.3.3-4.2% over FY12-14.
…while refining capacities additions are robust…: India will add
3.6%/7.1%/7.3% to refining capacities over FY12-14E. Cumulatively we
foresee a 740kbpd addition to India’s refining capacity in this period.
…necessitating increased exports: We forecast Indian product exports
to increase by 18-20% over FY11-14. While India will continue to be
short LPG, by our estimates, it would need to increase exports of middle
distillates.
Margin watch: Benchmark GRMs remained firm, averaging $10.2/bbl
in the past week (vs. $8.13/bbl in 2Q12). Gasoline spreads rose to
$22.4/bbl (from $17.5/bbl in 2Q), while fuel oil losses remained low at
$5.9/bbl.
Fuel marketing watch: While crude has come off over the past few
weeks, depreciation in the Rupee has offset a portion of the gains. Diesel
losses have stood at Rs8/lt over the last fortnight compared to Rs8.4/lt in
September.
Petrochemical spread watch: Polyester-Naphtha spreads have remained
more robust than anticipated, at $1266/MT (vs. $1228/MT in the
September quarter). Continuing tightness in the MEG market has seen
MEG-Ethylene at $622/MT (compared to $595/MT in the September
quarter).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Indian oil product demand has slowed over the past two years, and we
expect the trend to continue, based on recent datapoints. With new
capacities coming onstream, Indian refiners will need to increase exports
to sustain utilization levels, in our view.
Product demand has been slowing…: India’s oil consumption has
slowed over the last three fiscal years, with annual growth slowing to
c.3% from c.7% earlier. However, auto fuels – gasoline and gasoil –
have continued to grow at fairly robust rates, with declines in kerosene,
naphtha leading the growth down. Recent data points on consumption of
petroleum products (Aug-11, source: Infraline) reinforce a trend of
slowing growth (1.8% in August), led by a deceleration in kerosene,
petrol, and diesel. With slower automobile sales, we expect auto fuel
consumption growth to continue on a low growth trajectory. We expect
India’s oil demand growth to be c.3.3-4.2% over FY12-14.
…while refining capacities additions are robust…: India will add
3.6%/7.1%/7.3% to refining capacities over FY12-14E. Cumulatively we
foresee a 740kbpd addition to India’s refining capacity in this period.
…necessitating increased exports: We forecast Indian product exports
to increase by 18-20% over FY11-14. While India will continue to be
short LPG, by our estimates, it would need to increase exports of middle
distillates.
Margin watch: Benchmark GRMs remained firm, averaging $10.2/bbl
in the past week (vs. $8.13/bbl in 2Q12). Gasoline spreads rose to
$22.4/bbl (from $17.5/bbl in 2Q), while fuel oil losses remained low at
$5.9/bbl.
Fuel marketing watch: While crude has come off over the past few
weeks, depreciation in the Rupee has offset a portion of the gains. Diesel
losses have stood at Rs8/lt over the last fortnight compared to Rs8.4/lt in
September.
Petrochemical spread watch: Polyester-Naphtha spreads have remained
more robust than anticipated, at $1266/MT (vs. $1228/MT in the
September quarter). Continuing tightness in the MEG market has seen
MEG-Ethylene at $622/MT (compared to $595/MT in the September
quarter).
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