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Trade flows from the US to India are expected to flourish
further, especially as New Delhi is trying to reduce its reliance
on OPEC suppliers and eliminate the country's exposure to the
potential instability across major oil exporting regions such as
the Middle East Gulf and West Africa due to geopolitics. Meanwhile,
India's increasing appetite for energy in combination with the
additional production coming from the US creates good opportunities
and motivation for both countries to further develop trade with
each other. Crude oil trade flows have increased by 105%
year-on-year between January and October 2019, based on data by IHS Markit Commodities at
Sea.
The strategic energy partnership agreement signed by both
countries in 2016 was only the beginning of a relationship that
could last, covering both oil and gas. With the Middle East Gulf
accounting for almost 66% of Indian imports of crude oil,
instability in the region could be a big threat for supplies
heading to India. New Delhi understands that the country's buyers
cannot deal with drastically higher oil prices or cost of transport
if anything doesn't go according to plan. The US had a market share
below 2% in Indian imports last year, with its share now standing
above 5% so far in 2019.
Focusing on fuel oil, demand in India has reached a record low,
at least for the last two years, in September, in parallel to a
significant increase in LPG consumption. Demand for diesel is
estimated to have dropped by more than 3%. Meanwhile, LPG
consumption is understood to have expanded by 6%, with the
government having been pushing in favour of this cleaner fuel in
household kitchens to reduce pollution. It has been mainly kerosene
getting replaced by LPG as a cooking medium. Growth of car sales
has been recently recovering, with the trend expected to last
throughout 2020, even if reaching levels achieved in 2018 is still
considered rather difficult.
Posted 28 October 2019 by Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime & Trade, IHS Markit
