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India’s oil demand rose by 0.12 mb/d y/y in August to 4.29 mb/d despite the late arrival of monsoons that caused widespread flooding and dented consumption. LPG (+0.11 mb/d y/y) and gasoline (+58 thousand b/d y/y) led the growth, offsetting weakness in diesel (-17 thousand b/d y/y) and bottom-of-the-barrel fuels (bitumen, petcoke and fuel oil) as flooding hampered construction work. Falling diesel demand in late August left stocks brimming, resulting in some refineries cutting runs. The strength in gasoline demand came thanks to support from low prices and more miles driven and despite a 23% y/y decline in car sales. LPG demand rose on the back of two consecutive price cuts across July and August, a policy push that brought total users under the government’s subsidy scheme to 80 million and pre-Diwali restocking. Oil demand growth will be capped in September amid continuing monsoon rains a weak economic backdrop.
Refinery runs rose m/m by 42 thousand b/d to 5.19 mb/d (+0.1 mb/d y/y) in August, supported by the return of a CDU at the Jamnagar refinery from maintenance. We peg September runs at 4.85 mb/d, down y/y by 0.25 mb/d. Several refiners have announced September and Q4 19 maintenance to ready their refineries for the switch in gasoline (BS VI) and IMO bunker fuel specifications for 2020. IOC will shut its entire 0.3 mb/d Panipat refinery for up to three months, as well as its 0.16 mb/d Mathura refinery in November. Meanwhile, HPCL has shut its 0.29 mb/d Vizag refinery for an 85-day long maintenance run (started 5 September), while its Mumbai refinery will go offline for 45 days in October. As crude oil imports rose to a four-month high of 4.7 mb/d in August, implied crude inventories built by 3.3 mb.