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Lower Production of Crude Oil, Fertilisers Decelerates India’s April Core Sector Growth

The core sector index carries 40.27 per cent weightage of the items included in the index of industrial production

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Crude Oil, Fertilisers, India's, April
The index of eight core industries had risen 4.7 per cent in April 2018. Pixabay

Lower production of crude oil and fertilisers decelerated the output pace of India’s eight major industries in April to 2.6 per cent, official data showed on Friday.

According to the Ministry of Commerce and Industry data, the index of eight core industries had risen 4.7 per cent in April 2018. On a sequential basis, the core sector grew by 4.9 in March this year.

The core sector index carries 40.27 per cent weightage of the items included in the index of industrial production (IIP).

“The combined Index of Eight Core Industries stood at 127.5 in April, 2019, which was 2.6 per cent higher as compared to the index of April, 2018. Its cumulative growth during April to March, 2018-19 was 4.3 per cent,” the Ministry said in a statement.

Crude Oil, Fertilisers, India's, April
Lower production of crude oil and fertilisers decelerated the output pace of India’s eight major industries. Pixabay

On sector-specific basis, the output of refinery products, which has the highest weightage of 28.03, grew 4.3 per cent in April 2019 compared to the corresponding month of the last fiscal.

Electricity generation, which has the second highest weightage of 19.85, increased by 5.8 per cent.

Steel production, the third most important component with a weightage of 17.91, was up by 1.5 per cent during the month under review, whereas coal mining, with a 10.33 weightage, was higher by 2.8 per cent.

On the other hand, extraction of crude oil, which has a weightage of 8.98, declined by (-) 6.9 per cent during the month under consideration.

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The sub-index for natural gas output, with a weightage of 6.87, inched-lower by (-) 0.8 per cent.

Cement production, which has a weightage of 5.37, rose by 0.8 per cent in the month under review.

Fertiliser manufacturing, which has the least weightage of only 2.62, declined by (-) 4.4 per cent in April.

Crude Oil, Fertilisers, India's, April
On sector-specific basis, the output of refinery products, which has the highest weightage of 28.03. Pixabay

“Except electricity and to some extent refinery products and coal, all other segments of core sector have performed poorly in April 2019,” said Sunil Kumar Sinha, Director — Public Finance and Principal Economist India Ratings & Research (Fitch Group).

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“The government capex spending is the key driver of growth for core infrastructure industries because private corporate investment is down and out. With new union government in place India Ratings (Ind-Ra) believes much of the future performance of these core infrastructure industries would depend on what is there in store for them in the full budget which is expected to be presented in the month of July 2019.” (IANS)

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Crude Oil Prices Whipsaw in September Following Attacks on Infrastructure

US crude oil inventories continue to climb due to a rising trend in US production

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Crude Oil, Prices, Attacks
The wild ride in September has now been replaced by a slow trend lower. Pixabay

Crude oil prices lost ground in the Q3 declining by more than 7%. The wild ride in September has now been replaced by a slow trend lower. US crude oil inventories continue to climb due to a rising trend in US production. This comes despite a knee jerk spike in prices during September, following an attack on the main Saudi Arabian crude oil production infrastructure. It’s unlikely that oil prices will be able to gain traction when economic growth is contracting.

The Saudi’s Were Attacked

On September 14, Saudi Arabia was attacked. Rocket strikes hit their oil infrastructure, pushing prices up more than 14% in one day. It was the largest one day increase in oil prices in decades. Saudi Arabia announced that more than 5% of the worlds crude oil production had been sidelined. By Tuesday, September 17, the kingdom announced they would have all their production up by November. By the end of the Q3, it now appears that all the oil production that was taken offline is now back up and running. The initial reports suggesting it could take months for production to return to normal, were inaccurate which put downward pressure on prices.

Crude Oil prices continued to fall on the first day of the Q4 as Saudi Arabia agreed to a partial ceasefire in Yemen. Houthi rebels said that the attacks on the Saudi’s would stop if the Kingdom stopped targeting its positions with air strikes.

Crude Oil, Prices, Attacks
Crude oil prices lost ground in the Q3 declining by more than 7%. Pixabay

Inventories Continue to Rise

US commercial crude oil inventories increased, more than expected according to a report from the Department of Energy. Inventories have been rising due to production in the US climbing to 12.5 million barrels a day. Stockpiles rose by 3.1 million barrels from the previous week, according to the EIA. At 422.6 million barrels, US crude oil inventories are at the five-year average for this time of year. 

Gasoline inventories edged lower and are now 3% above the five-year average for this time of year. Distillate fuel inventories decreased by 2.4 million barrels last week declining more than expected but remain 8% above the 5-year average according to the Energy Information Administration. Total commercial petroleum inventories decreased last week by 0.9 million barrels last week. 

US Demand is Rising

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Despite a decline in total global economic output, demand for oil products in the United States remains on the rise. According to the US Department of Energy, Total product demand over the last month averaged 20.9 million barrels per day, up by 2.1% year over year. Over the past month gasoline demand averaged 9.3 million barrels per day, down by 0.1% from the same period last year. Distillate fuel demand averaged 3.9 million barrels per day over the past month down by 0.6% from the same period last year. Jet fuel demand was down 4.2% year over year. 

The outlook for demand continues to slide. While the US is growing at approximately 2% year over year, it appears that Europe and Asia are contracting. There is a good chance that German growth will contract in the Q3, putting Europe’s largest economy into recession. It’s unlikely that oil prices will be able to gain traction when economic growth is contracting.