India's May diesel exports to SE Asia hit multi-year high on strong margins

Business Standard

3 days ago

Increased diesel from India, one of the largest suppliers in the region, is cooling spot premiums for the fuel in Asia
Reuters
India's diesel exports to Southeast Asia for May are set to hit the highest in at least four years, according to shiptrackers and three trade sources, as traders eyed higher profits in Asia while higher freight costs deterred shipments to Europe.
Increased diesel from India, one of the largest suppliers in the region, is cooling spot premiums for the fuel in Asia and pressuring derivatives markets, while tightening the fuel's availability in Europe and supporting prices there.
Shipments on the India-Southeast Asia route climbed to 600,000 metric tons (4.47 million barrels) or more this month, shiptracking data from LSEG, Kpler, Vortexa and two trade sources showed. Such levels were last seen at the end of 2021, Kpler data showed.
Most volumes were destined for Singapore or Malaysia, the data showed.
Meanwhile, Indian diesel bound for Europe in May was estimated at 500,000 tons, LSEG data showed.
"The re-direction of Indian diesel barrels east has had a two-fold effect," said Sparta Commodities analyst James Noel-Beswick.
"First, it has flooded the Singapore market, leading to a swift rebound in local inventories and applying downward pressure on diesel spreads since late April," he said.
For Europe, the drop in Indian supplies has prompted June ICE gasoil prices to rise, he added.
Asian cash premiums for 10-ppm sulphur diesel fell to seven-week lows of 20 cents per barrel early this week while refining margins have been struggling to hold above $16 per barrel, LSEG data showed.
ARBITRAGE
The average discounts for the east-west price spread for April and May were at $22 and $20 per ton, respectively, LSEG data showed, with traders saying such levels were slightly more profitable for sellers to sell east instead of west.
Lower shipping costs also helped push more Indian supply to Southeast Asia, they added.
Cost for chartering a medium-range vessel carrying 40,000 tons of diesel on the India-Northwest Europe route jumped to $2.35 million in the past week, equivalent to $59 per ton, up from $2.05 million last month, SSY Tanker data on LSEG Workspace showed.
In comparison, shipping fees for a similarly-sized vessel on the India-Singapore route were less than $1 million, the data added.
India's diesel production also rose in May after Reliance Industries restarted a crude unit at the Jamnagar refinery, leading to more exports, said Vortexa's head of APAC analysis Ivan Mathews.
Next month, India will probably export more diesel as local demand is set to fall during the monsoon season, two Singapore-based trade sources said. One of them estimated that demand could drop by 500,000 tons or more.