India’s Oil Demand Set to Surge Amid Festivals and Rabi Season

India’s oil consumption is expected to rise by nearly 4% year-on-year (YoY) in Q4 2024, driven by festive demand, the rabi sowing season, and elections. However, weather disruptions and softening crude prices may challenge the profitability of oil marketing companies (OMCs) in FY 2024-25.

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Festivals, Weddings, and Elections Drive Demand

According to S&P Global Commodity Insights, India’s oil demand will grow by 50,000-55,000 barrels per day (b/d)in Q4 2024, led by gasoline and diesel consumption. The festive season boosts travel, retail spending, and vehicle purchases, while the wedding season (November–January) further increases automobile usage and goods movement.
Upcoming state elections in Maharashtra and Jharkhand are also expected to push transportation fuel demand higher.

Rains Impact September Fuel Demand

Unusually heavy rains disrupted road transport, construction, and mining activities, leading to a 2% YoY decline in diesel consumption in September 2024. Gasoline consumption rose 3% YoY, though sequentially it declined.
“The northeast monsoon may dampen fuel demand temporarily, but the rabi season and festivals will drive recovery,” said Himi Srivastava, South Asia oil analyst at S&P Global.

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OMCs Face Profitability Challenges from Lower Crude Prices

Crisil Ratings expects OMCs to see shrinking margins as crude prices fall to $75 per barrel in H2 FY 2024-25 from $82 per barrel in H1. With the tapering of Russian crude discounts, OMCs’ gross refining margins (GRMs) are projected to shrink to $12-14 per barrel, down from $20 per barrel last year. Inventory losses may further impact profits.

Stable Retail Prices to Support Margins

Retail fuel prices remain unchanged, helping OMCs maintain marketing margins of ₹4.5 per litre (~$9 per barrel). This stability will offset some of the pressures from declining refining margins.
“Volatile crude prices will compress refining profits, but marketing margins will sustain overall returns,” said Aditya Jhaver, director at Crisil Ratings.

Conclusion

India’s oil demand will surge in Q4 2024, driven by festivals, weddings, and elections, but OMCs must navigate profit challenges amid falling crude prices and higher debt. With 80% of oil demand met via imports, stable fuel prices and marketing margins will remain essential in a volatile global environment.

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