India’ crude oil production
The EIA (U.S. Energy Information Administration) reported that India produced 1 MMbpd (million barrels per day) of crude oil in 2014 and 2015. It’s expected to increase marginally in 2016 and 2017. However, its consumption would be the key driver in the crude oil market along with China.
India’s crude oil consumption
In its Monthly Oil Market report, OPEC (Organization of the Petroleum Exporting Countries) stated that India’s oil demand averaged 4.1 MMbpd in 2015. India’s oil demand grew by 7% compared to 2014. India’s oil demand grew by 0.48 MMbpd to 4.6 MMbpd in February 2016 compared to January 2016. This is 12% more than the same period in 2015. The rise in the demand was driven by the rise in gasoline, diesel, fuel oil, and liquefied petroleum gas demand. The rise in two-wheelers and passenger car sales led to the rise in gasoline demand. Diesel demand rose due to the rise in seasonal demand.
India’s crude oil consumption estimates
The IEA (International Energy Agency) forecast that India will pass Japan as the third-largest crude oil consumer in 2016. The IEA estimates that India’s crude oil consumption will grow to 4.2 MMbpd (million barrels per day) in 2016—compared to 4.1 MMbpd for Japan in 2016. The IEA also stated that India is in a growth scenario similar to was ten years ago. The “Make in India” initiative and growing economy will drive India. It will be the highest growth-driven, oil-consuming nation by 2040. It will overtake China.
Impact on stocks and ETFs
The rise in demand from India and China will benefit crude oil prices. High oil prices benefit oil and gas producers like Ultra Petroleum (UPL), Whiting Petroleum (WLL), Northern Oil & Gas (NOG), and SM Energy (SM). Crude oil prices also impact ETFs and ETNs like the Direxion Daily Energy Bear 3x (ERY), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the VanEck Vectors Oil Services (OIH), and the SPDR S&P Oil & Gas Equipment & Services ETF (XES).
Read the next part of this series to learn more about the crude oil supply and demand gap.