India diesel exports jump 20% in March amid Iran war

New Delhi: Record difference between the price of crude oil and refined diesel amid the Iran war pushed India to increase diesel exports 20% month-on-month in March, even as overall refined product exports fell 8%, according to shipping data.

India exported 12.90 million barrels of diesel during the March 1-28 period, up from 10.74 million barrels in February, showed data from ship tracking firm Kpler.

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“Higher diesel export volumes are likely supported by improved economics for middle distillate production. Geopolitical tensions in the West Asia have tightened middle distillate balances, with diesel and jet fuel cracks strengthening more than gasoline (petrol),” said Nikhil Dubey, senior research analyst at Kpler.

Refiners adjust their product slate to capture stronger crack spreads and margins. The crack spread is the difference between the price of crude oil and the specific products refined from it, while margin is the realised profit for refiners based on their costs and efficiency.

Although crude oil prices have soared with the near closure of the Strait of Hormuz, the impact on different refined fuels has varied, with crack spreads on diesel and jet fuel touching fresh peak levels while those on petrol remain near normal.

Varied Impact

“Geopolitical tensions in the West Asia have tightened middle distillate balances, with diesel and jet fuel cracks strengthening more than gasoline (petrol),” said Dubey.

Refiners adjust their product slate to capture stronger crack spreads and margins. The crack spread is the difference between the price of crude oil and the specific products refined from it, while margin is the realised profit for refiners based on their costs and efficiency.

Although crude oil prices have soared with the near closure of the Strait of Hormuz, the impact on different refined fuels has varied, with crack spreads on diesel and jet fuel touching fresh peak levels while those on petrol remain near normal.

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India’s petrol exports have fallen 33% to 8.31 million barrels in March. “The decline in gasoline (petrol) exports is also due to India prioritising LPG (liquefied petroleum gas) production,” Dubey said, adding that refiners are redirecting some hydrocarbon streams away from petrol production and processing them as LPG.

India has stepped up domestic LPG production — up 40% since the beginning of the US-Israel war against Iran — to make up for the lost volumes from the Gulf, which supplied nearly 54% of India’s total LPG consumption.

Surprisingly, India’s jet fuel exports fell 4% to 2.63 million barrels in March, despite record cracks in the global market. The numbers may increase once end-of-month data revisions incorporate fuller shipping details, as exports under the ‘clean products’ category have surged 40% to 1.11 million barrels. The clean products category includes jet fuel, naphtha, gasoline and diesel, and is used by Kpler when the exact product type is not immediately confirmed.

India has imposed export duties of Rs 21.5 per litre on diesel and Rs 29.5 per litre on jet fuel to discourage private refiners from exporting and to keep the domestic market well supplied. Reliance Industries accounted for 75% of all refined fuels exported by India in March.

Exports of fuel oil, the dirty fuel used by industry and ships, also increased in March, up 27% to 1.71 million barrels as demand surged, offering better margins. Exports of naphtha fell 44% to 2.93 million barrels. India’s overall refined product exports declined to 31 million barrels this month from 33.67 million barrels in February.