About the Crude Oil Sector
India, ranked as the world's third-largest energy and oil consumer, heavily relies on the oil and gas sector, a key player among its core industries. In the period from April to November 2023, the country saw a 4.9% increase in the consumption of petroleum products, reaching 152.3 million metric tonnes (MMT), and an 8.4% rise in natural gas consumption, reaching 43.7 billion cubic meters (BCM) compared to the same period in 2022.
The economic growth of India is closely tied to its energy demand, which is expected to rise, making the oil and gas sector an attractive investment. With 23 refineries, India is already a significant refining hub in Asia, boasting a refining capacity of 253.91 MMT as of April 2023. About 35% of this capacity is owned by private companies.
In the fiscal year 2022-23, India's crude oil production reached 29.2 MMT, and the country is planning to expand its refining infrastructure to attract foreign investment. Petroleum product consumption in India stood at 222.3 MMT, with high-speed diesel leading at 38.6% in FY23.
India's crude oil production during April-July 2023 was 1.59 million barrels per day (MBPD), contributing to the country's overall petroleum consumption of almost 4.44 million BPD in the same fiscal year, up from 4.05 million BPD in FY22.
Future Outlook of the Crude Oil Sector
India's rapid economic growth drives increased oil demand for production and transportation. Crude oil consumption is expected to grow at an annual rate of 5.14%, reaching 500 million tonnes by FY40 from 202.7 million tonnes in FY22.
India's oil consumption in barrels is projected to rise from 4.05 MBPD (Million Barrels Per Day) in FY22 to 7.2 MBPD in 2030 and 9.2 MBPD in 2050. Diesel demand is set to double to 163 MT by 2029-30, with diesel and petrol making up 58% of India's oil demand by 2045, fueled by strong economic growth and urbanisation.
The forecast indicates a CAGR of 12.2% in natural gas consumption, reaching 550 MCMPD ( Million Cubic Metres Per Day) by 2030 from 174 MCMPD in 2021. Indian refiners plan to add 56 MTPA by 2028, increasing domestic capacity to 310 MTPA. India aims to double its oil refining capacity to 450-500 million tonnes by 2030.
India's energy demand is expected to outpace major global economies, doubling its share in global primary energy consumption by 2035, driven by sustained robust economic growth.
Things To Consider Before Investing in the Crude Oil Sector
Investing in the crude oil sector can be lucrative, but it comes with its own set of challenges and risks. Here are key factors to consider before making investment decisions:
- Oil Price Volatility: Crude oil prices are highly volatile and can be influenced by geopolitical events, economic conditions, and supply-demand dynamics. Investors should be prepared for price fluctuations.
- Global Economic Conditions: The crude oil sector is closely tied to global economic conditions. Economic downturns can lead to reduced demand for oil, impacting prices and potentially affecting investment returns.
- Geopolitical Risks: Geopolitical events, such as conflicts in oil-producing regions, can disrupt oil supplies and impact prices. Investors need to stay informed about geopolitical developments that may affect the oil market.
- Regulatory Environment: Oil exploration and production are subject to various regulations. Changes in environmental policies, drilling regulations, or taxation can significantly impact the profitability of oil investments.
- Technological Advances: Advancements in renewable energy and technology may impact the long-term demand for crude oil. Investors should consider the potential shift towards cleaner energy sources and the impact on the oil sector.
- Supply and Demand Dynamics: Understanding global oil supply and demand trends is crucial. Oversupply or undersupply situations can lead to price fluctuations. Factors such as OPEC decisions and non-OPEC production levels should be monitored.
- Currency Fluctuations: Oil prices are often quoted in U.S. dollars. Currency fluctuations can impact the actual returns for investors in different currencies.
- Environmental and Social Impact: Increasing awareness of climate change and environmental concerns may lead to regulatory changes and public sentiment that could affect the oil industry. Investors should consider the social and environmental impact of their investments.
How To Invest in the Crude Oil Sector Stocks?
To invest in sector stocks via Angel One, follow these steps:
- Log in to your Angel One account.
- Click on the search icon and look for your desired Crude Oil sector stock.
- Now, place your buy order. Simply click on the ‘Buy’ button, enter your desired quantity, and select the order type.
- To complete your transaction, click on the ‘Buy’ button.
You can track the status of the purchase from the ‘Positions’ section in the ‘Orders’ module. Once the stock is delivered, you can track its gains and losses from your ‘Portfolio.’
