India diesel exports to Singapore set for highs in August, drop for Europe: Trade

24 Aug, 2023

India's August Diesel Exports Soar to Singapore, Decline in European Markets: Trade Data

India is set to experience a surge in diesel exports to Singapore, reaching a 19-month high in August and surpassing 330,000 metric tons. This increase is attributed to cost-efficient freight expenses and low oil inventories in the Asian oil hub, according to insights from traders and analysts.

Conversely, diesel exports from India to Europe during August are predicted to reach their lowest point this year. A shiptracker indicates that shipments towards the east yield more profit, although this trend might not persist.

The rise in diesel exports to Singapore from India helps offset the decrease in exports from refiners in northeastern Asia, including China. The heightened availability of diesel in Singapore affects refining margins in Asia. In contrast, European refiners will benefit from reduced imports from India, supporting their margins.

Tracking data from Refinitiv, Vortexa, and Kpler reveals that India is expected to ship between 330,000 and 439,000 tons of diesel to Singapore in August. The monsoon-induced lull in domestic demand for gasoline and diesel has encouraged India to increase its exports of refined products, such as diesel, jet fuel, and gasoline.

Comparatively, freight expenses for the India-Singapore route were nearly $21 per ton cheaper at the end of July than the India-northwest Europe route, which was $14 per ton cheaper in mid-July. This cost difference has incentivized sellers to direct their cargoes eastward.

Replenishing stocks in Singapore, where commercial fuel inventories remain close to eight-month lows, has contributed to the amplified flows. Asia's gasoil refining margins have seen an almost $10 per barrel increase in August compared to July's average due to prompt supply tightness.

On another note, India's diesel exports to Europe are expected to decline to approximately 320,000 tons in August, marking the lowest point for the year based on Kpler data. Diesel imports into Europe are predicted to decrease in September due to stronger demand east of the Suez region, leading to a greater retention of cargoes within the area.

However, the rise in India's diesel exports to Singapore might be temporary as the expanding east-west arbitrage price spread could rekindle profitability in exporting to Europe, suggests FGE analyst Liu Xuanting.

Moreover, the exchange of futures for swaps (EFS) – the difference between front-month Singapore 10 ppm sulphur gasoil swaps and the corresponding ICE low sulphur gasoil futures contract – has widened to an average of minus $42 per ton in August from an average of minus $31 in July.

India's refined products exports will experience limitations from the second half of September as facilities, including crude units, at Mangalore Refinery and Petrochemicals Ltd and Reliance Industries Ltd will undergo maintenance. Additionally, Indian refiners are expected to maintain stocks ahead of the Diwali holidays in October to accommodate festive demand, according to a Singapore-based analyst.

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