India's diesel exports to Singapore are set to hit a 19-month high in August and exceed 330,000 metric tons, boosted by cheaper freight costs and low inventories in the Asian oil hub, traders and analysts said.
The country's exports of the fuel for August to Europe, on the other hand, are poised to fall to their lowest this year, according to one shiptracker, as shipments to the east are more profitable, but that situation may not last.
The rise in Indian diesel exports to Singapore will compensate partially for lower exports from refiners in northeast Asia including China, and the increased availability will therefore cap strong refining margins in Asia. Conversely, European refiners' margins will be supported by the lower imports from the South Asian nation.
India is on track to ship between 330,000 and 439,000 tons of diesel in August to Singapore, shiptracking data from Refinitiv, Vortexa and Kpler showed.
The volume is the highest since January 2022, said Serena Huang, Vortexa's head of Asia-Pacific analysis.
"The seasonal lull in India's gasoline and diesel domestic demand due to the monsoon has seen the country raising its clean product exports for August to date," she said, referring to refined products such as diesel, jet fuel and gasoline.
Freight costs for the India-Singapore route were around $21 per ton cheaper than the India-northwest Europe route in end-July, compared with $14 a ton in mid-July, data from Sparta Commodities showed, making it more lucrative for sellers to send cargoes east.
Replenishment of stocks in Singapore, where commercial inventories of the fuel remain near eight-month lows, is also driving the flows, said Sparta analyst James Noel-Beswick.
Asia gasoil refining margins have climbed almost $10 per barrel so far in August from July's average, Refinitiv Eikon data showed, on prompt supply tightness.
Meanwhile, India's diesel exports to Europe in August could fall to around 320,000 tons, the lowest this year, Kpler data showed.
Diesel imports into Europe in September are expected to fall because demand east of Suez has been stronger and more cargoes will likely remain in the region instead of heading West, one Europe-based trader said.
However, the jump in India's exports to Singapore could be short-lived as the east-west arbitrage price spread is widening, which could make exports to Europe more profitable again, said FGE analyst Liu Xuanting.
The exchange of futures for swaps (EFS), or the spread between front-month Singapore 10 ppm sulphur gasoil swaps and the corresponding ICE low sulphur gasoil futures contract, widened to an average of minus $42 a ton so far in August from an average of minus $31 in July, Refinitiv Eikon data showed.
And India's refined products exports will be curtailed from second-half of September as Mangalore Refinery and Petrochemicals Ltd and Reliance Industries Ltd shut some facilities including crude units for maintenance.
Also, Indian refiners are likely to keep stocks before the Diwali holidays in October to meet festive demand, a Singapore-based analyst said.
(Reuters - Reporting by Trixie Yap and Ahmad Ghaddar; Editing by Florence Tan and Muralikumar Anantharaman)
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