India could be replacing China as the main engine of global oil demand growth, says the recently released Oil Market Report for the month of April. Yesterday, the IMF had said that India will clock 7.5 percent growth in 2016-2017.
In the report, IEA says that India will see the strongest ever demand volume increase in 2016.
“For 2016 as a whole, India will see a growth of around 300 kb/d – the strongest ever volume increase. Reforms to the rules allowing refiners to directly import crude oil are all part of a general trend towards liberalization that should underpin India’s growth momentum.”
Oil-importing economies such as India are benefitting immensely from lower crude prices, however, the benefits would have been accentuated had the Indian Rupee not depreciated against the US dollar.
Lower crude oil prices present a never-before opportunity to India, which must be seized with both hands.
The IEA report also suggests that balance in the oil markets will be attained in the second half of 2016. Accelerated decline in US oil output and a coordinated production freeze are likely to bring stability to the ‘nervous’ oil markets, which are vacillating on every news and rumor. Higher oil prices will revitalize the balance sheets of nations such as Russia which are facing recessionary pressures due to a massive collapse in prices. However, Russia’s role in calming the markets is questionable since it continues to increase its output even in the wake of alarming supply levels and talks of production freeze getting louder.
The report estimates OPEC crude oil production of 32.8 mb/d in 2Q16 and 33.0mb/d in both 3Q and 4Q. Growth in global oil demand is also expected to drop to 1.2 mb/d in 2016, below 2015’s 1.8 mb/d expansion.
For more information, please refer to the IEA OMR for April.