Sudden fall in oil price: the three simple charts that explain the unexpected


India Covid-19 and petroleum demand

The crude oil price fell on Thursday by a modest amount despite the presence of encouraging factors that usually bolster it. As this is the case, in order to catch a glimpse of the unexpected, it is worth looking at the latest EIA report, analysing the impact of Covid-19 on the Indian economy in general and petroleum sector in particular.

The reports depict a grim cumulative picture – much worse than what we were led to believe.

The petroleum consumption is down by 0.4 million barrels per day; the loss of 8% led to the loss of 4million barrels in March and April – a significant loss, indeed.

With the findings of the new data, the EIA, the Energy Information Administration, has revised down its own earlier forecast for India up until July.

The report cites the way the transport sector came to a grinding halt during the latest wave of the pandemic in India, with a new deadly variant that wreak havoc in much of India; the inevitable result was a steep decline in the consumption of gasoline and diesel used in transportation.

The forecast of the EIA is clearly in line with the data published by the PPAC, Petroleum Planning & Analysis Cell of the Ministry of Petroleum and Natural Gas in India; the damage is all too clear to see:

IPPAC India - decline in petroleum products in May

Google’s Covid-19 mobility report also backs up the grim outlook in India, when it comes to the consumption of petroleum products; it found a clear correlation between steep decline in mobility data and the consumption of the diesel and gasoline.

Google mobility in India - April, May

On a positive note, the EIA expects that the demand of gasoline and diesel will reach pre-pandemic levels by July – an assessment that remains to be seen in light of the severity of Covid-19 being gradually on decline in India. 

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