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India Leads Asia's Refined Fuel Demand Recovery
India is emerging as the key driver of refined petroleum product demand across Asia, helping offset weaker consumption in other regional markets as the sector recovers from disruptions linked to the US-Iran conflict and the Strait of Hormuz.
While Asia-Pacific fuel demand is expected to recover during the second half of 2026, the pace of that recovery will largely depend on two factors: the evolution of geopolitical tensions affecting Middle East energy flows and the speed at which China resumes crude oil imports.
Asia's Fuel Demand Fell to Multi-Year Lows
Historical market data indicate that Asia-Pacific refined products demand declined by 3.11 million barrels per day (Mbd) year on year in April, reaching its weakest level since October 2021.
According to the analysis, much of the decline resulted from the wider consequences of the US-Iran conflict, which disrupted fuel and feedstock supplies across the region.
Shortages of LPG, naphtha and, to a lesser extent, crude oil reduced refinery activity and petrochemical production while higher fuel prices weakened transport fuel consumption.
Beyond supply constraints, rising prices, lower consumer confidence and reduced economic activity also contributed to weaker regional demand.
China Remains the Market's Biggest Variable
China experienced one of the sharpest declines in fuel demand during the period.
Transport fuel consumption fell by 580,000 barrels per day, or 6.5% year on year, during April and May.
Asia-Pacific total refined products demand (mbd)
Asia-Pacific refined products demand y/y changes by quarter (mbd)
The report attributes the decline to several structural and short-term factors, including weaker petrochemical demand, higher domestic fuel prices and the continued shift towards new energy vehicles (NEVs), plug-in hybrid electric vehicles (PHEVs) and public transport.
At the same time, lower Chinese crude imports released additional cargoes into the international market, allowing refiners elsewhere in Asia to increase throughput and partially offset regional supply shortages.
The report suggests that China's future crude purchasing strategy will remain one of the most important variables influencing fuel availability across Asia.
Hormuz Flows Continue to Shape Regional Recovery
Preliminary data for June indicate that fuel demand began recovering after the temporary easing of tensions between the United States and Iran.
Improved export flows through the Strait of Hormuz supported higher refinery utilisation, lower oil prices and improved fuel availability across the region.
However, renewed geopolitical tensions have once again increased uncertainty surrounding the outlook for regional energy markets.
The report notes that its published demand outlook assumes a gradual recovery in oil movements through the Strait of Hormuz, although recent developments have placed that assumption under greater pressure.
India Becomes the Region's Growth Engine
Unlike most Asian markets, India has continued to record resilient fuel demand despite the challenging trading environment.
The report highlights that demand for transport fuels has remained strong, supported by limited pass-through of higher fuel costs to consumers.
Preliminary industry data for July show that diesel and gasoline sales by India's state-owned refiners increased by more than 20% year on year during the first half of the month.
LPG demand remained weaker, reflecting India's dependence on imports moving through the Strait of Hormuz and changes to the country's subsidy framework.
Even so, India remains the strongest source of refined fuel demand growth across Asia and is expected to continue supporting regional consumption as other markets recover more gradually.
Medium-Term Outlook Remains Weaker Than Before the Conflict
Despite the expected recovery, the report projects significantly slower demand growth than anticipated before the geopolitical crisis.
Average refined products demand in 2027 is expected to be only 80,000 barrels per day above 2025 levels, compared with the 630,000 barrels per day increase projected before the conflict.
The downgrade reflects weaker expectations for LPG demand, particularly in China, where petrochemical overcapacity continues to weigh on consumption.
Other non-OECD Asia-Pacific economies also face a softer outlook due to weaker currencies, fiscal tightening, subsidy reforms and accelerating electrification of transport.
South Asian markets affected by fuel rationing are expected to experience longer-lasting structural impacts, while rising adoption of electric two- and three-wheelers is gradually reducing gasoline demand growth across the region.
Shipping and Energy Markets Remain Closely Linked
The analysis highlights how closely Asia's fuel demand is tied to developments in maritime trade and energy logistics.
Disruptions to crude exports through the Strait of Hormuz continue to influence refinery operations, tanker movements and refined product availability across Asia.
While India has emerged as the region's primary source of demand growth, future market conditions will continue to depend on the stability of Middle East shipping routes and China's crude import strategy, both of which remain critical to balancing regional fuel supply.
India refined products demand y/y changes by quarter (kbd)
