India's Diesel Exports to Southeast Asia Surge to 7-Year High in March Amid Iran Conflict.

India's Diesel Exports to Southeast Asia Reach Seven-Year High

India's diesel exports to Southeast Asia surged to the highest in more than seven years in March, shipping data revealed, as traders shifted supply to cover short positions and refiners capitalized on higher profits in Asia resulting from the U.S.-Israeli war with Iran.

According to data from analytics firm Kpler and three trade sources, approximately 1 million metric tons (7.45 million barrels) of diesel were shipped on this trade route, with around half of the volumes destined for Singapore.

The surge in exports is expected to boost spot sale margins for Indian refiners who have purchased large volumes of prompt Russian crude to replace Middle East supply disrupted by the war. Traders tapped India's diesel supply for Southeast Asia and Australia after the Middle East conflict disrupted crude supplies to Asia, leading refineries to cut output and countries including China to ban exports of refined products.

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India's position as a swing supplier in global oil markets enables it to sell its refined products either to Europe or Asia, whichever is more profitable. These shipments will help to ease supply tightness going into April, traders said. Some analysts expect the trend to last in the near term despite the Indian government reinstating export taxes for diesel.

Sparta Commodities' analyst James Noel-Beswick suggested that the trade flow can continue into August at least, citing arbitrage calculations. The US has issued temporary waivers for the sale of Russian and Iranian oil cargoes at sea to ease global prices.

A comparison of the front month April east-west price spreads is presented below:

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The narrowing of the price spreads, with the difference between Singapore paper swaps on a free on board basis and ICE gasoil futures, has made it more favorable for traders to pivot cargoes to east of Suez markets instead of west. Typically, traders deem a discount of less than $40 a ton to be more favorable for them to make such a shift.