Crude oil processing 9% lower in August due to weaker demand

Crude oil processing for the month of August was 9% less in August than in July due to a fall in demand for refined products. According to Ministry of Petroleum and Natural Gas data, refineries processed 19.5 million metric tonnes (MMT) or 4.62 million barrels per day (mbd) in August, lower than 5.07 mbd in July and the nameplate capacity of 5.02 mbd.

The global demand for transportation fuels and other refined products surged after reopening of economies post-pandemic. This surge in demand helped refineries to make extraordinary margins. Higher margins, in turn, prompted the government to impose windfall tax on exports of fuels.

With the situation now returning to normal, the demands are now getting moderated. Monsoon months of June to August are usually marked by lower demand for transportation fuels and slower economic activity as rains hamper mobility. Mobility as well as economic activities have gathered pace compared to last year. But inflationary pressure is prompting central banks across to sharply raise interest rates, which will impact the economies and also fuel demand.

Uncertainties caused by the Russia-Ukraine war and the rerouting of supplies due to the West's efforts at cutting the intake of Russian oil have kept crude oil and fuel prices high. Crude oil rates have moderated a bit in recent weeks but constrained global refining capacity has kept fuel prices high.