Furnace oil consumption in India jumped 29.8% in July as industries shifted from natural gas to alternative fuels amid supply disruptions linked to the West Asia crisis.
According to data released by the Petroleum Planning and Analysis Cell (PPAC), consumption of furnace oil and low sulphur heavy stock (FO/LSHS) increased to 634 thousand metric tonnes (TMT) in July. It stood at 489 TMT in the same month last year.
For the April-July period, furnace oil consumption increased 11.9% to 2,222 TMT.
Furnace Oil Consumption Rises as Industry Switches From Gas
The sharp increase came as industrial users moved towards alternative fuels following disruptions in natural gas supplies.
Furnace oil was among the few petroleum products to record higher consumption in July. Naphtha demand fell 13.8%, while petcoke consumption declined 3.6%. Light diesel oil consumption dropped 23.3%.
The data indicates a clear shift in industrial fuel use as companies respond to tighter gas availability and higher prices.
Natural Gas Supply Restrictions Drive Fuel Switching
The Ministry of Petroleum and Natural Gas notified the Natural Gas (Supply Regulation) Order, 2026 on March 10.
The order followed disruptions to LNG shipments through the Strait of Hormuz and force majeure notices from suppliers. It introduced a priority-based system for natural gas allocation.
Domestic PNG, CNG for transport, LPG production and essential pipeline operations received the highest priority. Fertiliser plants received 70% allocation.
Tea manufacturers, other grid-connected industrial consumers, and industrial and commercial users supplied through city gas distribution networks received 80% allocation.
Furnace Oil Gets Regulatory Clearance as Alternative Fuel
The Commission for Air Quality Management (CAQM) amended its Direction No. 65 on March 13.
The amendment allowed industries, hotels, restaurants and other commercial establishments across the National Capital Region to temporarily use alternative fuels instead of natural gas.
The permitted alternatives included high-speed diesel, biomass and refuse-derived fuel pellets. Coal and kerosene could also be used when other approved fuels were unavailable.
The Gujarat Pollution Control Board issued a similar order on March 14. Its three-month permission covered boilers, furnaces and other gas-dependent industrial equipment.
The Gujarat order specifically listed furnace oil as an alternative fuel. Other permitted fuels included coal, lignite, light diesel oil, kerosene, naphtha, biogas, briquettes and charcoal.
NCR Alternative Fuel Relaxation Extended to September
The CAQM relaxation was initially valid for one month. However, it remains in force amid continuing global energy supply uncertainty.
At its 29th Full Commission meeting on August 18, CAQM noted that the relaxation had been extended until September 13.
The Commission linked the extension to the impact of the conflict in the Middle East on global energy supplies.
Natural Gas Consumption Falls Marginally in July
India’s natural gas consumption stood at 5,740 million standard cubic metres (MMSCM) in July. This was 1.05% lower than the 5,801 MMSCM recorded a year earlier.
However, consumption during April-July increased marginally to 22,958 MMSCM, compared with 22,869 MMSCM in the corresponding period last year.
Domestic gas production declined 3.5% in July to 2,864 MMSCM. Production during April-July fell 4.3% to 11,245 MMSCM.
LNG imports increased 1.5% in July to 2,915 MMSCM. During April-July, LNG imports rose 5.3% to 11,867 MMSCM.
As a result, India’s dependence on imported natural gas increased to 51.7% during April-July from 49.3% a year earlier.
Gas Prices Remain Higher Than Domestic Price Cap
The administered price mechanism ceiling for gas produced by ONGC and Oil India remained at USD 7 per MMBTU during the period.
However, the calculated formula price was higher. It stood at USD 10.76 in April, USD 11.59 in May, USD 10.93 in June and USD 8.73 in July.
Spot prices were significantly higher. The Indian Gas Exchange recorded a weighted average price of Rs 1,837 per MMBTU, or about USD 19.2 per MMBTU, in July.
The exchange recorded a trading volume of 247 MMSCM during the month.
Domestic Production Supports Furnace Oil Supply
Higher domestic production also supported the increase in furnace oil consumption.
FO/LSHS production increased to 3.9 million metric tonnes (MMT) during April-July, compared with 3.3 MMT during the same period last year.
At the same time, petroleum product imports declined 45.1% during April-July. PPAC attributed the decline mainly to lower imports of LPG, petcoke and fuel oil.
Furnace Oil Demand Gains Amid Energy Market Uncertainty
The rise in furnace oil consumption highlights the impact of global energy disruptions on industrial fuel choices.
With natural gas supplies facing pressure and alternative fuels receiving temporary regulatory clearance, industrial users have increased their reliance on furnace oil and other substitutes.
The trend could continue as long as global energy markets remain volatile and natural gas availability remains constrained.
Key Details
Furnace oil consumption rose 29.8% year-on-year to 634 TMT in July, compared with 489 TMT a year earlier. Consumption during April-July increased 11.9% to 2,222 TMT. The increase came as industries switched from natural gas to alternative fuels amid supply disruptions linked to the West Asia crisis. Meanwhile, FO/LSHS production rose to 3.9 MMT during April-July, while India’s dependence on imported natural gas increased to 51.7%.
