India’s diesel exports hit 1-year high in September as record margins drive Europe shipments

New Delhi: India's diesel exports hit a one-year high in September, driven by record margins, with nearly half the shipments heading to Europe. About 620,000 barrels per day (bpd) of diesel was exported in the month, as per commodity analytics firm Kpler.

Soaring diesel prices and margins significantly influenced export volumes and destinations. "Singapore diesel cracks (profit margins) against Dubai (crude oil) were running above $60 a barrel in September, a strong incentive for refiners to maximise diesel production and exports," said Nikhil Dubey, lead analyst, refining, at Kpler.

About 280,000 bpd went to Europe in September, nearly 80% higher than in August. There were, however, no diesel shipments to Russia after some flows had been observed in the preceding three months, according to Kpler.


About 200,000 bpd were shipped to customers in Africa, 50,000 bpd to Asia and 40,000 bpd to the Americas. The remaining 50,000 bpd went to unknown destinations.

Diesel Equations Changing

September's benchmark diesel prices were double those of a year ago, driven by refinery and shipping disruptions in West Asia and Russia. Tighter supplies and soaring prices have prompted China to ban diesel exports this month. The US administration was also under pressure to do the same before G7 countries agreed a few days ago to release more oil and diesel from storage to calm fuel prices.

Europe remains dependent on diesel imports, with the US and Saudi Arabia serving as key suppliers. "Recent refinery disruptions in Saudi Arabia, alongside already tight Russian product availability, further tightened the regional diesel balance. This created additional room for India to emerge as a swing supplier into Europe," Dubey said.

A windfall tax on exports of diesel - about $37 per barrel in September - erodes a significant portion of globally available margins for exporters. This tax, however, doesn't apply to the export-only Jamnagar unit of Reliance Industries (RIL), the main exporter from India. RIL's other refining unit, which primarily serves the domestic market, exports small volumes, as do Rosneft-backed Nayara Energy and some state-run refiners like Mangalore Refinery and Petrochemicals (MRPL).

RIL, Nayara Energy and MRPL also sell some volume to Indian Oil, Hindustan Petroleum and Bharat Petroleum for domestic retail sales. They do so at a price that is usually the international price minus the windfall tax.

Increased supplies from the Gulf region as well as from Russia are providing Indian refiners with "a crude slate supportive of middle distillate production, particularly diesel," said Dubey. "From a configuration perspective also, Indian refineries are generally geared towards relatively high middle distillate yields."