(MENAFN- Live Mint) India is poised to close 2024 with a higher oil demand growth rate than China, underscoring its emergence as a key consumption hub in Asia, according to a report by S&P Global Commodity Insights.
In the first 10 months of 2024, India's oil demand climbed 180,000 barrels per day (bpd), a 3.2% year-on-year rise, compared to China's more modest growth of 148,000 bpd, or 0.9%, during the same period in 2023.
"India is set to end the year with its oil demand growth rate surpassing China 's, making it one of the fastest-growing consumption centres," the report noted, adding that this trend is likely to persist into 2025. The country's refiners are accelerating expansion plans and diversifying crude sources to capitalize on this momentum.
India's oil demand is projected to grow by 3.2% in 2025, nearly double China's 1.7%, according to Kang Wu, global head of macro and oil demand research at S&P Global Commodity Insights. While China's market size remains over three times larger than India's, stakeholders are increasingly focusing on India due to expectations of peak demand arriving much later than in China.
The report highlighted India's upcoming refining capacity surge, with the country set to commission its first greenfield integrated refinery complex in nearly a decade. The HPCL Rajasthan Refinery Ltd in Balotra, Rajasthan, will process a mix of over 83% imported medium-grade crude and domestic crude. This project is expected to add up to 9 million tonnes of incremental annual feedstock demand, fuelling negotiations with global oil producers for long-term crude import agreements.
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As refining capacity expands, India is diversifying its crude import basket to reduce overdependence on traditional suppliers, the report noted. Prime minister Narendra Modi's recent visit to Guyana has heightened expectations of long-term crude supply agreements with South America, while diplomatic outreach to Africa and Latin America is set to further broaden sourcing options, it said.
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"Recent diplomatic visits will help bring in crude oil from Africa and Latin America, but the growth in absolute volume would depend on the overall crude market," said Abhishek Ranjan, South Asia oil research lead at S&P Global Commodity Insights.
Ranjan said that the share of West Asian crude shipments in India's basket will likely decline marginally due to the diversification of import sources. "But, overall, the crude grades in India's import basket are expected to remain medium grades and we don't anticipate significant drop in share of sour crude in 2025," he added.
India's crude import dependency, currently at 85%, has led to a pragmatic approach focused on cost efficiency. Russian oil has emerged as a key source, averaging 1.7 million barrels per day between January and September, thanks to attractive discounts.
The Indian government has said that the country would continue buying oil from the cheapest available sources to meet growing demand.
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With a growing appetite for petroleum products and expanded refining capacity on the horizon, India is cementing its position as a pivotal player in the global oil market, even as it navigates challenges tied to geopolitical and market dynamics.
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