India's May diesel exports to Southeast Asia seen at multi-year highs on higher margins
India's diesel exports to Southeast Asia for May are expected to be the highest in at least four years, as traders eyed higher profits in Asia and as higher freight costs deterred shipments to Europe.
Increased diesel exports 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 said.
Asian cash premiums for 10-ppm sulfur diesel GO110-SIN-DIF fell to a seven-week low of 20 cents per barrel early this week, while refining margins GOSGSWMc1 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 look east instead of west. Lower shipping costs also helped push more Indian supply to Southeast Asia, they added.
The cost charter 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, or $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 showed.
India's diesel production also rose in May after Reliance Industries RELI.NS restarted a crude unit at its Jamnagar refinery, said Vortexa's head of APAC analysis Ivan Mathews, adding that early onset of the monsoon season likely dampened domestic demand. These factors led to more surplus diesel barrels available for exports, he said.
India will probably export more diesel next month as the monsoon intensifies, two Singapore-based trade sources said. One of them estimated that local demand could drop by 500,000 tons or more.
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