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Moody's: Petroleum consumption to grow by 6% in India

28 September 2016 , 15:21Debjoy SenguptaNeftegaz.RU772

Moody's Investors Service says that slow but steady demand growth from China and India underpins its stable outlook for the Asian refining and marketing (R&M) industry, despite a likely modest earnings contraction through 2017.

 

Petroleum consumption in India is likely to grow by about 6%  in 2017-18, but this is not enough to fully offset slowing growth in China said Moody's in a report on Asian refining and marketing industry.

The report mentions that refiners focused on domestic markets including the three state-owned Indian refiners - Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd, Hindustan Petroleum Corporation Ltd are least vulnerable to growing Chinese exports and weakening Chinese demand.

These refiners sell over 80 % of petroleum products within their domestic market and derive less than 5% of sales revenue from China.

 

Moody's Investors Service says that slow but steady demand growth from China and India underpins its stable outlook for the Asian refining and marketing (R&M) industry, despite a likely modest earnings contraction through 2017.

 

However, we expect China's refined-product demand will grow at 3% in 2017-18 and Indian petroleum consumption by 6% per annum over the same period, said Rachel Chua, a Moody's Analyst. These two countries together account for 80% of Asia's refined-product demand growth, he said.

 

Despite the modest growth in China and India, Moody's does not expect a material improvement in demand-supply dynamics over the next 12-18 month as demand growth will only match or marginally exceed total supply additions.

Moody's could change the industry outlook to negative if net refining capacity additions and increasing refinery output in Asia materially outpace growth in demand, such that projected EBITDA for the industry declines by more than 10%; or if demand from China and India contracts.

Conversely, Moody's would consider a positive outlook if regional demand overwhelms capacity additions such that refining margins exceed $8 per barrel on a sustained basis, leading Moody's to raise its EBITDA growth forecast to above 10%.

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