September 2023 witnessed a remarkable upswing in India’s diesel exports to Europe, marking the highest levels for the year. This surge can be attributed to a combination of factors, including diminished supplies from West Asia and the United States due to autumn refinery maintenance and robust demand in Europe. Vortexa, a trusted energy cargo tracker, has shed light on the significant shift.
During September, India’s diesel exports to Europe soared to approximately 333,000 barrels per day (bpd), signifying a substantial uptick of nearly 47 percent compared to August. More impressively, this surge demonstrated a staggering year-on-year increase of 57 percent, as reported by Vortexa.
A standout observation from the data is the pivotal role played by export-oriented private sector refiners in driving this surge. Prominent companies like Reliance Industries Ltd (RIL) and Nayara Energy Ltd (NEL) took the lead in diesel exports to Europe during September.
The revival of the East-West diesel arbitrage, which had been dormant for several months, emerged as a lucrative opportunity. This resurgence was fueled by constrained supplies from the Middle East and the US due to autumn refinery maintenance, coupled with strong demand in Europe. Serena Huang, Head of Asia-Pacific Analysis at Vortexa, underscored the significance of these contributing factors.
The international diesel market had sustained robust cracks and margins for several months due to supply constraints. Indian refiners had previously directed their diesel exports to Asian hubs like Singapore, largely due to lower freight costs compared to Europe. However, as the price differential between Asian and European diesel widened significantly, the appeal of exports to Europe grew substantially.
India, positioned as the world’s third-largest consumer of crude oil, has transformed into a net exporter of petroleum products owing to its substantial refining capacity, which surpasses domestic demand. The nation’s increased acquisition of discounted Russian oil following the 2022 Ukraine invasion has further solidified its role in the global supply landscape for crude oil and refined products.
While the diesel market remains strong, India’s fuel exports may experience a temporary slowdown due to maintenance shutdowns at various refineries, including units at RIL’s expansive Jamnagar facility. Additionally, with the festival season from October to December driving up domestic fuel demand in India, refiners are likely to prioritize catering to the local market over exports.
Russia, the world’s second-largest diesel exporter, implemented a temporary ban on diesel and petrol exports on September 21, 2023, to address fuel shortages domestically. While analysts anticipate a short-lived ban, its repercussions on European diesel cracks remain uncertain. The reduction in Russian diesel exports has disrupted the supply chain, potentially reshaping diesel trade patterns.
Consequently, countries like Turkey and Saudi Arabia, significant purchasers of Russian diesel, may find themselves compelled to curtail exports to Europe. Moreover, the diversion of certain diesel supplies from the US to Brazil, another substantial consumer of Russian diesel, could further complicate the European diesel market.