India’s oil demand expected to rise in 2022, undeterred by inflationary risks

Inflation continues to bite

Oil consumption is expected to increase even as prices soar.

While Brent fell from $139.13 a barrel on March 7, its highest level in 14 years, it is still high at $117. Acuite Ratings & Research expects the Asian benchmark for oil to hold around $97 during FY23.

Crisil Research expects consumer price inflation to average 5.4% in FY23 and pegs Brent at an average of $85-90 per barrel in FY .

According to Nomura, “a general increase in food energy costs and a narrowing output gap will likely keep CPI inflation above the Reserve Bank of India’s target (2-6% ) in 2022”.

The big picture

OPEC sees inflationary pressures and ongoing geopolitical unrest weighing on global oil demand.

It expects global oil consumption to rise 4.29% year-on-year to 100.9 million barrels per day in 2022, compared to 6.28% growth in 2021.

The International Economic Agency, in its March 2022 report, predicts global oil demand of 99.7 million barrels per day in 2022, a growth of 2.1% over the previous year. The IEA lowered its forecast as soaring commodity prices and international sanctions imposed on Russia following its attack on Ukraine are expected to significantly depress global economic growth.

The United States, Russia, Canada, Brazil, Kazakhstan, Guyana and Norway are seen as drivers of non-OPEC oil supply in 2022, while production is expected to decline in d other countries, mainly in Indonesia and Egypt, according to the monthly OPEC report. India’s oil production is expected to rise 2.2% year-on-year to 0.77 million barrels per day in 2022, he said.

Steve R. Hansen