Fuel demand slips in January from nine-month peak on back of lower mobility

India's fuel demand slipped in January after hitting a nine-month peak in December, hit by lower mobility due to cold weather in parts of the country and a slowdown in industrial activity.

Consumption of fuel, a proxy for oil demand, was about 4.6% lower than the previous month at 18.7 million tonnes in January, data from Indian oil ministry's Petroleum Planning and Analysis Cell (PPAC) showed on Wednesday.

Sales of diesel fell 7.6% in January from a month ago to 7.18 million tonnes, while sales of gasoline, or petrol, fell 5.3% to 2.82 million tonnes, the PPAC data showed.

"Festive season is over, and cold temperatures might have played a role," said Refinitiv analyst Ehsan Ul Haq.

India's manufacturing industry started the year on a weaker note, expanding at its slowest pace in three months in January as output and sales growth slackened, a private survey showed.

On a yearly basis, however, fuel consumption was up 3.3%. Sales of diesel rose 12.6%, while sales of petrol jumped 14.2%.

"Car sales remain strong... on the whole, Indian oil demand remains on the right track and will incentivise refiners to keep refinery runs high," Haq said.

Passenger vehicle (PV) sales jumped 22% year-on-year to 3,40,220 units in January, while it grew 8% from pre-COVID 2020 levels, helped by healthy bookings and improved supplies, data from the Federation of Automobile Dealers Associations showed.

With an investment boom India is enroute to become world's fastest-growing economy in 2023, likely to spark sharp increases in industrial activity, while the central bank puts inflation relief measures in place.

Cooking gas or liquefied petroleum gas (LPG) sales decreased 2.1% year on year to 2.51 million, while naphtha sales dipped 14.4% to 1.23 million tonnes.

Sales of bitumen, used for making roads, fell about 20%, while fuel oil use jumped 9.1% last month.