In Short:
India’s diesel exports surged in September 2024, up 44% month-on-month, due to refinery maintenance in Europe and lower domestic consumption during the monsoon. However, exports are expected to decline during the festival season, as domestic demand rises and Europe’s refinery maintenance ends. Additionally, global refining margins are under pressure due to weak demand and higher refining capacity, impacting profitability.
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Declining margins are the result of relatively weak demand for petroleum products even as global refining capacity increases | Photo Credit: ARRANGEMENT
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<h2>India's Diesel Export Forecast: A Decline Ahead</h2>
<p>After reaching a six-month peak in September 2024, **India's diesel exports** are set to dip during the festive season. This decline is attributed to diminishing price opportunities in Europe, as expectations of rising domestic consumption loom large from October through December.</p>
<h3>What the Numbers Say</h3>
<p>According to the energy insight specialists at **Vortexa**, India's diesel exports soared by an impressive 44% month-on-month and 21% year-on-year, averaging about <strong>656,760 barrels per day</strong> last month. This surge is largely credited to ongoing maintenance at refineries in Europe, which boosted their demand for Indian diesel.</p>
<h3>The Seasonal Impact</h3>
<p>It's essential to note that diesel consumption in India, vital for transportation and logistics, typically falls during the rainy months from June to September. In fact, August and September 2024 saw domestic diesel consumption hitting record lows of 15 and 24 months, respectively. This meant a more considerable volume available for exports.</p>
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<p>"With robust diesel exports to Europe over the previous months and overall demand appearing sluggish, the region has likely accumulated significant stockpiles," remarked **Serena Huang**, Head of APAC Analysis at **Vortexa**, during an interview with <i>Businessline</i>.</p>
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<h3>Analyzing Outbound Shipments</h3>
<p>“The strong export figures can be traced back to weaker domestic demand due to the monsoon and open diesel arbitrage to Europe amidst local refinery upkeep. As domestic demand in India picks up this month and European refinery work wraps up, we could witness a slowdown in Indian diesel exports to Europe,” Huang added.</p>
<h3>The Coming Months</h3>
<p>A senior official from a domestic refinery highlighted that typically, exports from October to December are lower than those from July to September. This time of year also sees the **FMCG** and **FMCD sectors** ramping up activities for **Diwali** and other festivities, driving more logistics and transport needs. Concurrently, exports tend to increase as preparations for the Western holiday season kick off.</p>
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<p>“However, we are bracing for lower export revenues due to a slowdown in **China** coupled with recession fears in **Europe** and the **US**. Additionally, refining margins are feeling the heat,” the official added.</p>
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<h3>Pressure on Margins</h3>
<p>Data from **OPEC** indicates that refinery utilization rates dropped to an average of <strong>87.86%</strong> in September, translating to a throughput of **25.40 million barrels per day** across selected Asian countries, including Japan, China, India, Singapore, and South Korea. This marks a drop of 1.7 percentage points from August and is significantly lower compared to September 2023.</p>
<h3>Global Trends</h3>
<p>Furthermore, the **US EIA** reports that refinery margins globally are dwindling, signaling reduced profitability in refining crude oil and selling petroleum products. This decline correlates with subdued demand for petroleum products, despite an increase in global refining capacity.</p>
<h3>Looking Ahead</h3>
<p>The **3:2:1 crack spread**, a measure of refinery margins, has fallen below the five-year average since spring, plunging further during late summer and early autumn. The EIA notes, “This year, the average refinery margin for September hit its lowest point for that month since 2020, when low demand for transportation fuels was particularly impactful due to pandemic-related travel restrictions.”</p>
<h3>Market Movements</h3>
<p>According to **Emkay Global**, India's oil imports surged in September, reaching $12.5 billion (up 13.8% month-on-month) while exports plummeted to $4.7 billion (down 20.5% month-on-month). This has unfortunately led to an increase in oil deficit, despite significantly lower crude oil prices.</p>
<h3>Export Statistics</h3>
<p>In September 2024, **India's petroleum product (POL) exports** climbed by 21% year-on-year in volume to **5.8 million tonnes**, while the value dipped by 9% year-on-year to $3.9 billion. Likewise, over the April-September FY25 period, export volumes rose almost 1% year-on-year to **31 million tonnes**, but the value saw a decrease of 7% year-on-year, equating to $22 billion.</p>
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