India’s diesel exports to Europe surge on refinery maintenance, strong profits

In September, India's diesel exports to Europe likely reached an unprecedented peak. 

The surge in exports was driven by traders capitalising on strong profits in Western markets during a period of refinery maintenance, according to data from shiptrackers and trade sources quoted in a Reuters report.

In September, Europe received between 1.3 million and 1.4 million metric tons (9.7 million to 10.4 million barrels) of supply from Asia's main swing supplier. This data is based on information from LSEG, Kpler, and two trade sources.

Exports from India to Europe have reached these levels for the first time since tracking began in 2017.

Indian refiners are significantly increasing their operations and exporting excess products, with gasoline and diesel shipments reaching multi-year peaks. Approximately one-third of their crude oil supply is sourced from Russia.

September's total diesel exports reached nearly 3 million tons, marking a five-year high, according to Kpler shiptracking data.

East-West spread expanding

In September, diesel east-west spreads rose to an average of $45 per metric ton, a significant increase from under $30 in August, according to LSEG pricing data. This surge incentivized traders to transport the product to Europe.

Diesel supply in Europe has decreased due to refinery maintenance, leading to a strengthening of prices, according to traders.

European crude processing capacity is projected to increase its offline status from approximately 400,000 barrels per day (bpd) in September to between 550,000 and 600,000 bpd in October, according to two sources.

Data from two shipbrokers indicates that shipping costs have decreased by approximately $10 per ton.

Shipping costs for 90,000 tons of refined fuel on the India-Europe route decreased to $3.25 million-$3.5 million in the latter half of September. 

This is a drop from the $4 million-$4.2 million observed between late August and early September, according to available data.

India's increased gasoil shipments to Europe have led to a tighter supply in Asia. This has resulted in a nearly two-month high for 10-ppm sulphur gasoil cash premiums, reaching almost $1.50 a barrel, according to the report.

Decline expected

Ivan Mathews, Vortexa's head of APAC analysis, predicts a month-on-month decline in India's transport fuel exports for October. This is attributed to an anticipated increase in domestic demand during the Diwali festive season.

The anticipated decrease in exports might be mitigated. Higher product cracks compared to last year could motivate Indian export-oriented refiners to maximize production, potentially leading to some export sales.

Traders are exercising caution regarding future diesel volumes on the India-Europe trade route. 

This apprehension stems from the lack of clarity surrounding the European Union's 18th sanction package, which prohibits refined products derived from Russian oil, and its potential impact on India's fuel exports.

Middle East-origin barrels are readily available and can easily replace current volumes, according to the report.