India’s crude oil imports  

India’s Petroleum Planning and Analysis Cell estimated that India’s crude oil imports rose 3.3% to 4.58 MMbpd (million barrels per day) in November 2016 compared to the previous month. It’s 12.7% higher than the same period in 2015. In November, imports were at the highest level since April 2009. A rise in domestic demand led to the rise in refinery demand. It led to the rise in crude oil imports. The rise in crude oil imports from India supports crude oil (USO) (UCO) (PXI) (ERX) (USL) (RYE) prices. India is the second-largest crude oil consumer after China in Asia. For more on crude oil prices, read Part 1 of this series. For more on China, read China’s Crude Oil Imports and Demand Impact Crude Oil Prices.

India’s Crude Oil Imports and Demand Impact Crude Oil Prices

India’s crude oil imports and demand

  • Market research company Energy Aspects estimates that crude oil consumption in India will rise by 400,000 barrels per day in 2016 and 2017.
  • On December 5, 2016, OPEC’s secretary general said that India’s crude oil demand will more than double to 10 MMbpd (million barrels per day) by 2040. It would support major oil producers and oil prices in the long term.
  • The IEA (International Energy Agency) projects that India’s crude oil demand growth rate will be the highest by 2040. To learn more, read India’s Crude Oil Demand Will Likely Drive the Crude Oil Market.
  • The IEA estimates that India is the fourth-largest country in terms of global refining capacity. India’s government data show that India’s refining capacity grew from 62 million tons per year in 1999 to 215 million tons per year in 2015. India’s refining capacity is expected to increase more due to various expansion projects, which could support crude oil imports.
  • The U.S. Energy Information Administration reported that India plans to build three SPRs (strategic petroleum reserves) in 2016. The expected capacity of the SPRs is 39.1 MMbbls (million barrels) of crude oil. Most of the facilities will be complete by the end of 2016. India is also planning a second phase of SPR capacity of 91 MMbbls by 2020. It could also add to its demand for crude oil.
  • India’s crude oil production was at 900,000 bpd in 2015, much less compared to its refinery capacity at 4.4 MMbpd.
  • The Society of Indian Automobile Manufacturers reported that India’s total vehicle sales across categories fell 5.5% at 15.63 lakh units in November 2016 compared to the previous month. It’s the steepest fall in 43 months due to demonetization in India. It’s a short-term slowdown. Total vehicle sales rose 20% in September 2016 compared to the same period in 2015. It was the highest in the last 4.5 years. Vehicle sales rose due to the favorable monsoon and the pay hike for government employees. Bullish car sales data support crude oil prices and refined product prices.

High demand from India could have a positive impact on crude oil prices. High crude oil prices could have a positive impact on producers’ margins such as Goodrich Petroleum (GDP), Contango Oil & Gas (MCF), Chevron (CVX), Stone Energy (SGY), and W&T Offshore (WTI).

Moves in crude oil prices also impact ETFs and ETNs including the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the PowerShares DWA Energy Momentum (PXI), the United States Brent Oil (BNO), the Fidelity MSCI Energy (FENY), the ProShares Ultra Oil & Gas (DIG), and the Vanguard Energy ETF (VDE).

For more on crude oil prices, read What Can Investors Expect in the Crude Oil Market in 2017?Decoding the World Oil Supply and Demand Gap in 2017US Election: How Will It Impact the Stock and Energy Markets, and Crude Oil Prices Skyrocket as OPEC Agrees to Cut Production.

For more on crude oil price forecasts, read Will Crude Oil Prices Test 3 Digits Again and EIA and Goldman Sachs Upgrade Crude Oil Price Forecasts.

For related analysis, visit Market Realist’s Energy and Power page.

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