India’s Oil Demand Growth Set to Outpace China in 2025: S&P Commodity Insight

India is on track to surpass China in oil demand growth by the end of 2024, marking the South Asian nation as one of the fastest-growing oil consumption centers globally. According to S&P Global Commodity Insights, India’s oil demand is projected to continue its upward trajectory into 2025, with a forecasted growth rate of 3.2 per cent, compared to China's 1.7 per cent.

"India will be the leading driver, along with Southeast Asia and other parts of South Asia, of the region's future oil demand growth," said Kang Wu, global head of macro and oil demand research at S&P Global Commodity Insights. "In 2025, India is forecast to deliver a relatively faster growth in oil demand of 3.2 per cent, compared with China's 1.7 per cent," Wu added, emphasising the role of petrochemical feedstock requirements in oil consumption growth in both countries next year.

India's Refining Expansion Gains Momentum
As India’s oil consumption surges, its refining sector is set to experience significant growth. The country is preparing to launch its first greenfield integrated refinery complex in nearly a decade. The HPCL Rajasthan Refinery Ltd., located in the state of Rajasthan, is under construction and expected to process 9 million metric tons per year. This refinery will process primarily imported medium-grade crude and is expected to help India manage its growing oil demand.

Crude Diversification Efforts
To reduce over-reliance on a few crude suppliers, India is ramping up its crude import diversification strategy. Efforts to secure long-term agreements with new suppliers, including those in Africa and Latin America, are gaining momentum following high-level diplomatic visits. However, Middle Eastern crude will likely continue to make up a significant portion of India's oil imports in 2025, although its share is expected to slightly decline.

Russia Becomes India’s Largest Oil Supplier
As India looks to diversify, Russian crude oil has become a significant part of its import portfolio due to attractive pricing. In the first three quarters of 2024, Russian oil imports averaged 1.7 million barrels per day (b/d), making Russia India’s largest supplier of crude, surpassing even traditional oil giants.

Global Oil Market Shifts Focus to India
While China remains the largest oil market by volume, India’s rapid growth has shifted global oil market attention toward the country. With India’s peak oil demand expected to come much later than China’s, stakeholders are increasingly focusing on India as a key driver of global oil demand growth in the coming years.