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Wednesday, February 21, 2024

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

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| Photograph Credit score: 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 security risks drive up freight costs, commerce sources and analysts say.

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

Persistently excessive freight prices can be more likely to immediate sellers of India-origin cargoes to search for consumers 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% up to now week to issue within the conflict threat premium. “Disruptions within the Purple Sea coincide with the beginning of world refining upkeep season, with U.S. outages projected to peak in February and European overhauls round 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 positive factors witnessed in ICE GO (gasoil) cracks and spreads present resilience and are poised to proceed their rise, not less than within the brief time period,” 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 Purple 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 rise 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 as a result of minor upkeep at some downstream models at Reliance’s Jamanagar refinery, two commerce sources stated, citing IIR refinery runs knowledge. Reliance didn’t instantly reply to a request for remark.

Jet gasoline exports regular

India-origin exports of aviation gasoline to Europe, nevertheless, have remained regular with an open arbitrage window and secure demand. Immediate jet gasoline swap costs are buying and selling not less than $3 a barrel above diesel, equal to the extra freight value premiums, one Europe-based supply stated.

No less than 88,000 bpd of jet gasoline for January will probably be sure for Europe, Vortexa and Kpler shiptracking knowledge confirmed.

“I believe it is open very a lot,” stated an Indian refiner who affords jet gasoline export cargoes month-to-month, referring to the arbitrage window. “However freight has been wild.”

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