India’s diesel exports to remain near 3 year high in September

India’s diesel exports are expected to remain near a 3 year high in September, as monsoon rains reduced the need for fuel used in irrigation pumps. Reportedly, India will be exporting 2.85 million tonnes of diesel in September similar volumes compared with August. According to government data, Augusts’ volume was the highest since September 2013, when India shipped out 3.37 million tonnes. As per Indian-refiner, diesel demand has not been that good during this monsoon season and has generally been flattish.

Reflecting the trend state-owned Indian Oil Corp (IOC) exported diesel for the first time in more than five years and the ramp-up of a new refinery could also temporarily keep exports high after the monsoon draws to a close this month.  IOC exported its first low-sulphur diesel cargo in more than five years in August and followed up by offering a second cargo. While the first cargo was sold at a deep discount due to a low flash point making it more difficult to blend, any additional spot cargo will weaken an already oversupplied diesel market in Asia.

The increase in shipments from the world's No. 3 oil consumer has driven the profit margin for refining diesel in Asia to a seasonal six-year low. Refineries in India are also running at near maximum capacity due to healthy refining margins driven by low feedstock prices. The refinery is expected to boost IOC`s diesel output by 200,000 tonnes next month, which will reduce its offtake of the fuel from private refiners by a similar amount. This in turn could drive up exports from private refiners like Essar Oil and Reliance Industries.