India's Petroleum product demand soars in FY26, projecting a record 252.9 MT due to strong economic growth, rising transportation, and aviation fuel demands, and relaxed global tariffs.
Increase in petroleum products exports by 3% during fiscal year 2025, nonetheless, their value experiencing a decline of 7%
In the coming fiscal year, India's demand for petroleum products is set to reach an unprecedented high of 252.9 million tonnes (MT). Several factors contribute to this surge, including increased demand for transportation fuels, the ongoing aviation recovery, and strong economic growth.
Transportation fuels, such as diesel and motor spirit, are experiencing growth due to factors like increased vehicle ownership, freight movement, and post-pandemic travel normalization. The demand for aviation turbine fuel (ATF) has surged as a result of air route expansions and travel recovery. Household energy consumption, specifically liquefied petroleum gas (LPG), is also on the rise due to government subsidies and rural electrification initiatives.
India's projected 6.5% GDP growth in FY26, according to EY, aligns nicely with increased energy intensity, driving industrial activity and logistics expansion. This, in turn, directly boosts diesel and industrial fuel consumption.
The favorable global oil market dynamics, such as lower projected crude prices ($60-65/bbl range for FY26), reduce input costs, encouraging domestic refining and consumption. Additionally, petroleum exports remain resilient due to exemptions from recent global tariffs, incentivizing domestic production capacity utilization and supporting demand projections.
However, potential risks and challenges exist. Supply glut warnings for 2025 could lead to further price depressions, boosting affordability. Geopolitical disruptions may affect trade routes, but India's diversified crude sourcing helps mitigate supply risks. Inflation control remains a concern, with EY expecting CPI inflation below 4% due to stable energy prices, preserving consumer purchasing power.
This demand outlook assumes continued policy support through fiscal measures and contained global headwinds. While geopolitical uncertainties and potential supply gluts could impact the petroleum markets, India appears well-positioned for continued growth in the sector.
- In the finance sector, analyst Ajay predicts an increase in India's petroleum product demand to reach 252.9 MT in the fiscal year 2024 (FY24), driven by factors such as the growth of the economy and the defi (decentralized finance) sector.
- The oil-and-gas industry is expected to benefit from this increased demand, with energy exports remaining resilient in the face of global tariffs.
- By 2025, it's projected that the demand for transportation fuels, like diesel and motor spirit, will continue to grow, thanks to factors like increased vehicle ownership, freight movement, and post-pandemic travel normalization.
- The energy sector is also preparing for an increase in household energy consumption, specifically liquefied petroleum gas (LPG), due to government subsidies and rural electrification initiatives.
- In addition, the market for aviation turbine fuel (ATF) is expected to see a surge due to air route expansions and travel recovery, contributing to the overall increase in petroleum product demand.
- The finance industry is optimistic about the future of India's petroleum sector, as the favorable global oil market dynamics, including lower projected crude prices, reduce input costs, encouraging domestic refining and consumption, supporting the overall demand projections.
