India's surging refined product exports ease Asia fuel crisis
Can India perform a rescue act for Asia's refined fuels market similar to what China did for crude oil?
China dramatically cut its imports of crude to a 10-year low in June in response to the U.S.-Israeli war on Iran, thus freeing up oil for other buyers struggling to source cargoes amid the effective closure of the Strait of Hormuz.
India has taken a somewhat different tack, buying Russian crude and ramping up exports of refined products to help offset lower shipments from refineries in the Middle East and Russia.
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India's exports of light and middle distillates are expected to reach 1.55 MMbpd in July, according to data compiled by commodity analysts Kpler.
This is the second-highest level in Kpler records dating back to 2017 and almost double the 866,000 bpd recorded in May, which was the lowest in nearly four years and came amid the loss of crude from the Middle East after Iran effectively closed the Strait of Hormuz in response to the U.S.-Israeli attacks that were launched on February 28.
India's crude imports hit a 21-month low of 4.55 MMbpd in April, which crimped the ability of its export-focused refineries to run at full capacity.
However, India swung to buying Russian crude after the Trump administration waived sanctions, allowing importers to openly buy cargoes from Russia.
India's imports from Russia were 2.73 MMbpd in June and Kpler is estimating July arrivals will be 2.57 MMbpd, the two strongest months on record, eclipsing the 2.16 MMbpd from May 2023.
Similar to China's decision to cut crude imports, India's decision to buy Russian oil and increase refined product exports is not a case of altruism in order to help stressed markets in Asia — it's driven by prices.
India's refiners are taking advantage of the large premium being commanded by fuels like diesel and gasoline over crude oil.
Product premiums. Benchmark Brent crude futures have surged in recent days after the breakdown of the ceasefire between the U.S. and Iran, closing at $94.07 a barrel on Wednesday, up 34% from the post-deal low of $70.14 on July 2, and 30% higher than the pre-conflict close of $72.48 on February 27.
The regional benchmark price for gasoil, the building block for diesel, ended at $156.72 a barrel in Singapore on Wednesday, up 43% from the post-ceasefire low of $109.62 on June 26, and 71% higher than the $91.42 from February 27.
Singapore gasoline ended at $119.70 a barrel on Wednesday, up 27% from the post-deal low of $94.00 on July 9 and a premium of 51% to the $79.30 that prevailed on February 27.
It's not just India that is cashing in on the strong margins for refined products, as other countries with export capacity are increasing output.
Oman, which ships from ports outside the Strait of Hormuz, is expected to export 783,200 bpd of light and middle distillates in July, an all-time high and up from the prior record of 712,600 bpd in June, according to Kpler data.
Taiwan is forecast to export 306,000 bpd of light and middle distillates in July, the most since December and nearly three times the 124,000 bpd shipped in April, which was the lowest in five years.
Despite the efforts of some refined product exporters, Asia's imports of light and middle distillates are still lower than pre-conflict levels, with Kpler estimating arrivals of 5.80 MMbpd in July.
This is up from 5.19 MMbpd in June, which was the lowest in Kpler records going back to 2017, but July's figure remains 18% below the average of 7.05 MMbpd in the three months leading up to the conflict.
This shows that Asia's refined products markets remain tight and even if refiners have sufficient crude, there isn't enough export capacity to compensate for the losses from the conflicts in the Middle East and between Ukraine and Russia.
The views expressed here are those of Clyde Russell, a columnist for Reuters.
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