In line with the deterioration of India's economic outlook, Fitch Solutions has revised its forecast on fuel demand downward to 11.5 percent for 2020. Economists of research firm forecast India's real GDP to contract by 8.6 percent in the fiscal year 2020-21, down from the previous estimate of a 4.5 percent contraction.
"Demand weakness is spread across the board, with both consumer and industrial fuels set for the steep decline," Fitch Solutions said in a note. "We have made a further downward revision to our India refined fuels demand forecast for 2020, from -9.4 percent to -11.5 percent, in line with further deterioration in the country's economic outlook."
However, it sees a 5 percent year-on-year growth in 2021 and 2022, as the outbreak is brought under control and economic activity is normalised.
In the first quarter of 2020-21, the GDP shrank by 23.9 percent, the steepest contraction on record.
"While the nationwide lockdown (in place since March 25) was lifted on May 31, state-level restrictions remain in place and will likely drag on the economic recovery," Fitch said.
Further, it said that demand weakness is spread across the board, with both consumer and industrial fuels set for a steep decline.
In percentage terms, jet fuel has seen the sharpest contraction post-COVID-19, with consumption falling on average by 46.6 percent in the eight months to August. In April the demand contracted by 91.4 percent y-o-y, due to a total ban on flights, excluding those for essential cargo movement, such as medicines.
Petrol demand fell by an average of 16.1 percent in the YTD (with a low of 60.4 percent) and diesel demand (which is widely used in the transport, industrial and power sectors) was down by 25 percent, with a low of 55.5 percent.