Surge in India's Diesel Exports Amid Iran Conflict

In March 2023, India experienced a significant surge in diesel exports to Southeast Asia, reaching the highest levels in over seven years. Approximately 1 million tonnes (7.45 million barrels) of diesel were shipped, with around half of this volume destined for Singapore. This increase is attributed to traders adjusting their supplies to cover short positions and refiners capitalizing on higher profit margins in Asia, driven by the ongoing conflict between the United States and Israel against Iran. Notably, Reliance Industries, which operates the world's largest refining complex, accounted for about 90% of these shipments.

India's diesel exports to Southeast Asia in March rose to the highest level in more than seven years

The rise in diesel exports, which increased by 20% month-on-month, is linked to a record difference between crude oil prices and refined diesel, as geopolitical tensions in West Asia tightened middle distillate balances. Analysts have noted that the crack spreads for diesel and jet fuel have reached peak levels, prompting Indian refiners to adjust their production strategies to maximize profits. Despite an overall decline in refined product exports by 8%, diesel exports have remained robust, with refiners shifting focus from gasoline to diesel and liquefied petroleum gas (LPG) production.

India diesel exports jump 20% in March amid Iran warThe Straits Times

Analysts from consultancy FGE NexantECA highlighted that Asian buyers, traditionally reliant on Chinese and Northeast Asian sources, are now turning to India for diesel supplies. This shift is expected to alleviate supply tightness in the region as the conflict disrupts Middle Eastern crude supplies. Additionally, despite the Indian government's reinstatement of export taxes on diesel, some analysts predict that the trend of increased exports may continue into the coming months.

India's diesel exports to Southeast Asia in March rose to the highest level in more than seven yearsThe Straits TimesIndia diesel exports jump 20% in March amid Iran war

While the surge in diesel exports presents economic opportunities for Indian refiners, there are concerns regarding the implications of reinstating export taxes. Critics argue that these taxes could hinder the competitiveness of Indian diesel in the global market, potentially affecting future export volumes.

India's diesel exports to Southeast Asia in March rose to the highest level in more than seven years

There is a discrepancy in the reported figures for overall refined product exports, with some sources indicating a decline to 31 million barrels in March from 33.67 million barrels in February, while others suggest that the numbers may increase following end-of-month data revisions. Additionally, while diesel exports surged, exports of petrol fell by 33%, raising questions about the long-term sustainability of this export strategy.

India diesel exports jump 20% in March amid Iran war

• “Asian buyers must seek alternative sources, and Reliance Industries in India is among the main candidates in the region.” — Analysts, FGE NexantECA

India's diesel exports to Southeast Asia in March rose to the highest level in more than seven years

• “Higher diesel export volumes are likely supported by improved economics for middle distillate production.” — Nikhil Dubey, Senior Research Analyst, Kpler

India diesel exports jump 20% in March amid Iran war

• “India appears firmly committed to keeping its refineries at capacity, and Washington’s rather permissive stance on both Russian and Iranian purchases has given it the means to do so,” — James Noel-Beswick, Analyst, Sparta Commodities

The Straits Times

As the geopolitical landscape continues to evolve, India's role as a key supplier of diesel to Southeast Asia is likely to remain significant, influenced by both market dynamics and international relations.

The Straits Times