The steep rise of COVID-19 infections in India will slash global demand for oil, leading to a sizeable glut, Norway's biggest independent energy consultancy Rystad said.
The struggle in India, one of the world's largest oil consumer, will slash an extra 575,000 barrels per day (bpd) of oil liquids demand in April and 915,000 bpd in May 2021, disturbing the almost-balanced global oil market, according to the energy consultancy.
"As infections continue to rise and its health system is overwhelmed, India's oil demand could lose more ground going forward, making further downgrades possible, both on magnitude and duration," Louise Dickson, senior oil markets analyst at Rystad said in a note dated April 28.
India's fuel consumption rose in March for the first time in three months to its highest since December 2019, as economic activity gradually picked up.
However, coronavirus cases have surged in India, leading to curbs on movement across the country, a move analysts say could hit fuel demand in the world's third largest oil importer.
India reported 379,257 new COVID-19 cases and 3,645 new deaths on Thursday, according to health ministry data. It was the deadliest day so far for any country hit by the pandemic.
The sudden and very strict localised lockdowns imposed over the past few days will result in a 13% demand drop in India in April compared to March 2021, Rystad said.
"The India setback will sting, especially if (its) refineries are not able to reduce runs to an acceptable level to avoid inventory builds," according to the note.
Earlier this week, oil cartel OPEC, together with Russia and their allies, stuck to their plans for a gradual easing of oil production restrictions from May to July, after OPEC raised slightly its demand growth for 2021 to 6 million barrels per day.