Indian oil demand remained steady at 3.37 mb/d in December, making it the strongest December on record, and higher y/y by 98 thousand b/d (3%). Demand was led by a pick-up in diesel at 1.482 mb/d (up by 63 thousand b/d or 4.4%), as a cold spell across North India prompted the use of diesel generators. Although the government last week moved towards partially deregulating diesel prices, we believe that the move is unlikely to have a detrimental impact on demand growth, as that the oil companies have only been authorised to raise prices in small quantity and over time and given the latest move does little to close the wide price disparity between gasoline and diesel (still more than Rs. 20). As was evident from the pick-up in diesel use during the latest cold snap, diesel will remain the fuel of last resort. Gasoline consumption growth eased to just 0.7%, impacted by weak auto sales (lower y/y by 12.5% in December) and the growing bias towards diesel cars, while naphtha demand remained strong at 0.3 mb/d, higher y/y by 56 thousand b/d (22.6%), supported by continued weakness in domestic gas production.Across 2012, Indian oil demand averaged 3.281 mb/d, a record high and up y/y by 0.16 mb/d (5.1%), the strongest pace of growth since 2008. Diesel led the way, with record demand of 1.408 mb/d, while full year gasoline demand totalled a record 0.36 mb/d.
Meanwhile, December crude oil imports eased to 3.578 mb/d, but stayed higher y/y by 0.38 mb/d (12%), while refinery runs were strong at 4.383 mb/d (2012 average of 4.171 mb/d), higher y/y by 0.19 mb/d (4.4%), with India continuing to run down crude oil stocks.