India's fuel demand reined in by Covid-19 restrictions in January

India's fuel consumption fell in January after scaling a nine-month peak in December, government data showed on Wednesday, as COVID-19 curbs in several states hit mobility and industrial activity.

Fuel consumption in the world's third biggest oil consumer, a proxy for oil demand, totalled 17.61 million tonnes, down 3.7% from December and 0.2% from a year before, data from the oil ministry's Petroleum Planning and Analysis Cell showed.

"After relatively strong recovery during the festive season, recovery is taking a respite. Recent surge in COVID-19 cases should have played a role in limiting demand," Refinitiv analyst Ehsan Ul Haq said.

"While high oil prices are a drag on demand recovery, car sales have also not picked up as much as expected. However, India's economy looks very strong and this will also lead to higher demand in the next few months."

Since the start of this year, many states in the country have imposed varying degrees of restrictions including weekend curfews to contain infections caused by the highly transmissible Omicron variant of the coronavirus.

Growth in India's factory activity also fell to a four-month low in January as COVID-19 restrictions hurt new orders and output.

Consumption of diesel, which accounts for about 40% of India's refined fuel sales, fell 12.8% month-on-month to 6.37 million tonnes, and was down about 8.4% compared with January 2020. Diesel sales were down 6.4% from the same period last year.

Sales of gasoline, or petrol, declined by about 12.2% to 2.47 million tonnes last month compared to December, and was down 5.3% year-on-year. However, petrol sales were 0.7% higher than in January 2020, before any pandemic restrictions.

Sales of cooking gas, or liquefied petroleum gas (LPG), increased nearly 3.2% to 2.57 million tonnes year-on-year, while naphtha sales surged 6.3% to 1.29 million tonnes.

Sales of bitumen, used for making roads, were down 1.8%, while fuel oil use rose 5.4% in January.

(Reporting by Brijesh Patel and Kavya Guduru in Bengaluru; Editing by Alison Williams)