In recent years, India has become increasingly important to the tanker market as its role in oil trade has grown. In 2015, Indian refinery capacity increased by 0.5m bpd to 5.1m bpd, the fourth largest total globally. Meanwhile, Indian oil demand grew 6% to account for 17% of non-OECD Asian demand. After a strong 2015 for Indian oil imports, what does the country have in store for the tanker market this year?
Crude Imports Racing Away
India is the third largest seaborne importer of crude oil behind the US and China, and imported 3.9m bpd of crude in 2015, an increase of 4% y-o-y. In the first four months of 2016, Indian crude imports have increased by 13% y-o-y to average 4.3m bpd, largely on the back of the opening of the 0.3m bpd Paradip refinery at the end of last year, as well some filling of storage capacity. This growth has been largely supplied by increased imports from Iraq, Saudi Arabia and Nigeria. Furthermore, scheduled refinery capacity openings and an increasingly flexible policy regarding spot crude imports are expected to support Indian seaborne crude imports rising 9% in full year 2016.
A Demand Driver
Indian oil demand has also grown strongly recently, following a 6% increase last year, to stand at 4.4m bpd in Q1 2016. In full year 2016, Indian oil demand is expected to increase by 9% to 4.3m bpd, accounting for around 25% of projected global demand growth. This level of demand growth is underpinned by robustly increasing car ownership levels, an expanding road network and firm economic growth.
Accelerating Products Imports
The extent of the increase in domestic oil demand last year, notably for naphtha and gasoline, drove Indian products imports up by over 50% y-o-y to 0.4m bpd. In the first four months of 2016, Indian products imports have grown by almost 60% y-o-y. However, growth in full year 2016 is expected to slow as throughput at the Paradip refinery ramps up and the 0.12m bpd Cuddalore plant is scheduled to open.
Applying The Brake To Exports
Firm growth in domestic oil demand recently has limited volumes of oil products available for export. Shipments have come under pressure, with exports in 2015 declining by 8% to 1.3m bpd. Whilst the increase in oil demand in 2016 is likely to continue to limit export volumes to some extent, the impact of the continued expansion in refinery capacity is expected to outweigh this. As a result, Indian products exports are expected to improve slightly this year, with total Indian products exports currently projected to rise 5% to 1.3m bpd.
So, this year looks to be shaping up to be a positive one for Indian oil trade. Domestic developments are expected to result in India becoming an increasingly important driver of seaborne crude trade growth. While the drop in Indian products exports last year offset the rapid growth in imports, in 2016 both imports and exports of oil products are projected to increase. So, with India’s role in tanker trade continuing to evolve, the country looks set to become an increasingly important driver of oil trade dynamics.