India's Petroleum Product Demand Anticipated to Increase by 4%: Analysis
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New Delhi, Jan 5 (NationPress) India's demand for petroleum products such as petrol, diesel, and LPG is projected to experience an increase of three to four percent in the ongoing financial year, concluding on March 31, 2025, as per a report by Fitch Ratings.
The anticipated growth is fueled by escalating consumer, industrial, and infrastructure needs, according to the findings of the rating agency.
For India's oil marketing companies (OMCs), refinery margins are forecasted to dip below their mid-cycle averages in FY25 due to reduced product cracks, regional oversupply, and diminished advantages from price variations among crude types, the report indicates.
Nonetheless, marketing margins are expected to be more favorable than in FY24, owing to lower Brent crude oil prices during the current financial year, the report adds.
“This situation will alleviate some pressures from reduced refining margins for oil marketing companies, although pure refiners like HPCL-Mittal Energy Limited (HMEL, BB+/Stable) may encounter heightened profitability challenges. Our outlook anticipates refining margins will rebound to their mid-cycle averages in FY26, as regional oversupply diminishes and Brent crude oil prices align with Fitch's forecasts, while we expect marketing margins to stay supportive. HMEL's limited rating flexibility in FY25 is likely to improve in FY26 with a gradual recovery in refining margins,” the report states.
For upstream firms such as Oil and Natural Gas Corporation Limited (ONGC) and Oil India Limited (OIL), profits are expected to decline due to stagnant production and lower crude oil prices. Fitch Ratings noted that domestic prices for gas sourced from older fields are likely to remain capped at $6.5/MMBTU in the second half of FY25, based on a pricing formula linked to 10 percent of crude prices.
India's oil and gas production is anticipated to stay relatively stable in FY25. The report highlights that India's crude oil production is likely to decline by two to three percent in FY25, as upstream companies face challenges in halting natural output declines at aging fields despite technological investments aimed at improving recovery and accessing isolated reservoirs.
However, production is expected to witness low single-digit growth in FY26, driven by output increases from ONGC's eastern offshore KG Basin and privately owned fields, it adds.
The nation's dependence on crude oil imports is set to continue rising in the short term, as the growing demand for petroleum products is not matched by a corresponding increase in domestic crude oil production.
