SINGAPORE (Reuters) – India’s diesel and jet fuel exports to Singapore and Australia are poised to reach their highest levels in 2-1/2 years this July, driven by sluggish demand from Europe, according to industry sources and shipping data.
The surge in exports from India, a key supplier in Asia, to the Asia Pacific region is expected to cap prices and refiners’ margins while preventing a further inventory build-up in Europe, sources indicated.
Estimates from LSEG, Vortexa, Kpler, and two trade sources suggest that India will export between 157,000 barrels per day (bpd) and 224,000 bpd of diesel and jet fuel to Singapore and Australia in July, marking the highest levels since late 2021 and early 2022. This represents an increase of about 30% from June.
Exports to Australia are forecast to hit a more than two-year high of 450,000 metric tons, according to LSEG Oil Research. BP and Vitol, both operating fuel distribution businesses in Australia, are shipping most of these volumes. Shell is sending cargoes to Singapore, data from Kpler and LSEG revealed.
The increase in Australia’s imports is partly due to planned refinery maintenance, which has led local refiners to purchase more spot cargoes than usual, one source noted. Additionally, a new government mandate requiring increased stockpiles of refined products took effect in July, boosting imports further.
Conversely, India’s middle distillate exports to Europe are expected to fall to a six-month low of 142,000 bpd in July, according to LSEG data. This decrease is attributed to strong domestic supplies and slower-than-expected demand in Europe.
Some traders have redirected cargoes to Asia after freight rates on the India-Europe route increased, said a trade source based in Singapore. From June to mid-July, the cost of chartering a long-range (LR) tanker from India to the U.K. averaged $4.7 million, or $72 per ton, according to SSY Tanker data, doubling the shipping cost compared to potential earnings from moving Asian products to Europe.
However, the sustainability of India’s exports to Singapore and Australia is uncertain. Recent improvements in the arbitrage economics for shipments to Europe, following a dip in freight rates on this route, may impact future volumes.
As of July 26, shipping costs on the India-UK route had dropped to a five-month low of $3.7 million, or $57 per ton, SSY Tanker data showed.
“This momentum could slow in the next few months as several Indian refiners are entering planned maintenance this quarter, which would result in lower refinery supplies,” said Serena Huang, head of APAC analysis at Vortexa.
(1 ton = approximately 7.45 barrels for gasoil)
(1 ton = approximately 7.88 barrels for jet fuel/kerosene)