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India's fuel demand reached a nine-month high in December, helped by strong industrial activity and a rise in gasoline consumption due to an uptick in passenger vehicle sales.
Consumption of fuel, a proxy for oil demand, was about 4% higher than the previous month, and rose 3.1% year-on-year to 19.60 million tonnes in December, data from Indian oil ministry's Petroleum Planning and Analysis Cell (PPAC) showed on Monday.
"Demand in India, the third largest consumer, was growing the fastest among major economies in 2022," said UBS analyst Giovanni Staunovo, and that "solid economic growth should see Indian demand expanding also at a solid pace this year."
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India's manufacturing industry ended 2022 on a solid footing as business conditions improved at the fastest rate in over two years while growth in new orders and output accelerated, a business survey showed.
Sales of diesel, which account for about four-fifths of India's refined fuel demand, rose 6.5% in December from a year earlier to 7.78 million tonnes, while sales of gasoline, or petrol, rose 5.9% to 2.98 million tonnes, the PPAC data showed.
On a daily basis, consumption of gasoline rose marginally in December compared to the previous month.
Passenger vehicle (PV) sales for the month rose around 8.2% to 280,016 units and reached an all-time high of over 3.43 million units in 2022, the Federation of Automobile Dealers Associations (FADA) said.
The rise in PV sales was likely led by continued strong demand for utility vehicles (UV) that have grown more popular than entry-level compact cars.
"India's car sales are now the third largest light vehicle market in the world. This means that demand will continue to increase in the next few years as the middle class continues to buy cars," said Refinitiv analyst Ehsan Ul Haq.
Cooking gas or liquefied petroleum gas (LPG) sales increased 3.9% in December to 2.58 million tonnes, while naphtha sales edged up 0.5% to 1.11 million tonnes.
Sales of bitumen, used for making roads, fell 15.1%, while fuel oil use jumped 9.3% last month.