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India on observe to export record-low diesel to Europe in January as Red Sea dangers drive up freight prices

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Representational picture
| Photo Credit: Reuters

India’s exports of low-sulphur diesel to Europe are poised to hit a two-year low in January, after an unprecedented excessive final month, as Red Sea safety dangers drive up freight prices, commerce sources and analysts say.

Volumes have to this point declined by roughly 80% month-on-month to 33,400-58,000 barrels per day (bpd), Kpler, LSEG and Vortexa ship monitoring information confirmed.

Persistently excessive freight prices could be prone to immediate sellers of India-origin cargoes to search for patrons in Asia, which might tighten provides into Europe even additional forward of refinery upkeep season, merchants and analysts say.

Freight charges on the Asia-Europe route have gained greater than 30% previously week to issue within the battle danger premium. “Disruptions in the Red Sea coincide with the start of global refining maintenance season, with U.S. outages projected to peak in February and European overhauls around March,” analysts at shipbrokers Gibson wrote.

Europe’s largest oil refinery – Shell’s Pernis plant within the Netherlands – has begun upkeep that can take half its 4,00,000 bpd capability offline till mid-April. ExxonMobil can be shutting its 1,91,000 bpd Rotterdam refinery for upkeep from mid-February to late April.

The unfold between the 2 front-month European ICE low-sulphur gasoil futures contracts <LGOc1-LGOc2> surged to $23 a ton in backwardation on January 29, the best since mid-December, indicating market expectations of provide tightness.

Analysts at Sparta Commodities stated that prime freight charges had been hindering the opening of an arbitrage from the U.S. Gulf Coast to Europe, an necessary route for supplying Europe after Asia Pacific and West Asia. “The gains witnessed in ICE GO (gasoil) cracks and spreads show resilience and are poised to continue their rise, at least in the short term,” Sparta stated.

Cargoes loading from India usually sail to Europe by way of the Bab-el-Mandeb strait, a route that has turn out to be fraught since Houthi assaults on Red Sea ships, driving up freight prices and rendering the arbitrage successfully shut for the reason that first-half of January, stated a regional dealer coping with India-origin cargoes.

The improve within the east-west arbitrage differential is nearly the identical because the rise in freight prices, and even much less, rendering the arbitrage successfully shut since early January, stated a regional dealer coping with India-origin cargoes.

Imports from India have additionally been curbed by decrease common crude runs in January resulting from minor upkeep at some downstream items at Reliance’s Jamanagar refinery, two commerce sources stated, citing IIR refinery runs information. Reliance didn’t instantly reply to a request for remark.

Jet gas exports regular

India-origin exports of aviation gas to Europe, nevertheless, have remained regular with an open arbitrage window and steady demand. Prompt jet gas swap costs are buying and selling a minimum of $3 a barrel above diesel, equal to the extra freight value premiums, one Europe-based supply stated.

At least 88,000 bpd of jet gas for January will possible be certain for Europe, Vortexa and Kpler shiptracking information confirmed.

“I think it’s open very much,” stated an Indian refiner who presents jet gas export cargoes month-to-month, referring to the arbitrage window. “But freight has been wild.”

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