India’s largest oil refiner refrained from buying crude oil from West Africa, including Nigeria this week, defying expectations, amid a coronavirus induced slump in demand, according to oil traders.
India has been setting record numbers of daily coronavirus cases, threatening demand in the world’s third-largest oil importer. The country’s diesel and gasoline consumption could fall by a fifth this month.
“There was a real strong belief that we were going to see a very robust demand outlook from Asia,” said Edward Moya, senior market analyst at Oanda Corp. But with concerns in countries such as India and Japan, it shows “the global economic recovery is not going to be balanced by any means, and that’s going to derail the international travel situation.”
India’s combined consumption of diesel and gasoline is poised to plunge by as much as 20 percent in April from a month earlier due to renewed restrictions, according to officials from refiners and fuel retailers.
India was the largest export market for Nigeria in the third quarter (Q3) of 2020.
Export trade to India was valued at N500.63 billion, or 16.73 percent of the value of total exports, according to the latest terms of trade report released by the National Bureau of Statistics (NBS).
The dominant export commodity to India was Crude oil (valued at N444.89 billion). This was followed by Natural gas, liquified (N49.1 0billion), and Cashew nuts, in shell (N2.18 billion).
Oil fell last week with spreading coronavirus cases in countries such as India tempering optimism around positive signs out of the U.S. and Europe.
Futures in New York rose the most in over a week on Friday, but were unable to reverse a 1.6 percent weekly loss as the market weighed a global economic reopening that’s coming in fits and starts.
Oil is up almost 30 percent this year, but prices have struggled to reach new heights recently with the coronavirus situation deteriorating in some key oil consuming countries.
“In the short-term, the market is facing an uneven recovery in demand,” said Andrew Lebow, senior partner at Commodity Research Group. “With concerns around India and Japan, which are two of the top five consumers of petroleum products, the market is trying to gauge where we’re going on demand.”
While India has so far avoided re-entering a nationwide lockdown, the demand impact would be comparable to the one faced during last year’s initial wave were it to do so, Cornerstone Macro analysts Jan Stuart and Thomas Marchetti said in a note.