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Millions of New Vehicles in India Give Oil Prices a Lift

The Wall Street Journal. logo The Wall Street Journal. 07-06-2016

By Dan Strumpf and Jeffrey Sparshott

The latest rebound in oil prices is getting help from an unexpected source: surging demand from Asia’s emerging economies.

That surge is helping offset slower growth in developed countries and giving more potency to the effect of a recent string of outages that have curbed supply.

India, especially, is helping to up the slack from struggling economies, whose lackluster growth has contributed to oil prices’ long slide. The durability of India’s demand could be a big factor in whether oil’s recent run to a six-month high over $50 a barrel can be sustained.

“The big news in demand is growth in India, which now rivals China,” said Daniel Yergin, vice chairman of consulting firm IHS. “India really is seen as the growth market for oil.”

India is fueling a rapid economic expansion, with consumption hitting a record 4.35 million barrels of refined fuels a day during the first three months of the year, according to the International Energy Agency. That is up more than 10% from a year earlier and a big pickup from 2015’s pace.

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