India's diesel and jet fuel shipments to Singapore and Australia are set to hit the highest levels in 2-1/2 years in July as sellers looked east with demand tepid from Europe, according to industry sources and shipping data.
The jump in middle distillates exports from swing supplier India to the Asia Pacific will likely cap prices and refiners' margins in the region, while preventing a further build-up in inventories in Europe which have been weighing on prices there, the sources said.
India, one of Asia's leading fuel exporters, is expected to ship between 157,000 bpd and 224,000 bpd of diesel and jet fuel to Singapore and Australia in July, estimates from LSEG, Vortexa, Kpler and two trade sources showed, the highest since end-2021 and early 2022. This would be about 30% higher than June.
The volume to Australia is expected to surge to a more than two-year high of 450,000 metric tons, LSEG Oil Research said in a note. BP and Vitol shipped most of the volumes to Australia where they have fuel distribution businesses, while Shell shipped cargoes to Singapore, Kpler and LSEG data showed.
Planned refinery maintenance in Australia prompted some local refiners to buy more spot cargoes than usual, one of the sources added.
Also, the rise in Australia's imports comes after a government mandate to increase refined products stockpiles that took effect from July, two Asian refinery sources said.
Meanwhile, India's middle distillates exports to Europe are likely at a six-month low of 142,000 bpd in July, LSEG data showed.
Europe's imports from Asia have recently been curtailed by robust domestic supplies and slower than expected domestic demand, some analysts say.
Some traders diverted their cargoes to Asia after freight rates on the India-Europe route rose, one Singapore-based trade source said.
The cost of chartering a long-range (LR) tanker from India to the U.K. to carry 65,000 tons of diesel or jet fuel averaged at $4.7 million, or $72 per ton, from June to mid-July, SSY Tanker data showed. The shipping cost is double what a trader could make from moving Asian products to Europe.
However, several traders said it was unclear if India's exports to Singapore and Australia would be sustainable as the arbitrage economics for shipments to Europe has been improving after freight rates on this trade route dipped recently.
Shipping costs on the India-UK route slipped back to five-month low of $3.7 million - $57 per ton - on July 26, SSY Tankers data showed.
"This momentum could slow in the next few months as several Indian refiners are entering into planned maintenance this quarter, which would see lower refinery supplies," said Vortexa's head of APAC analysis Serena Huang, referring to India volumes bound for Asia.
(1 ton = around 7.45 barrels for gasoil)
(1 ton = around 7.88 barrels for jet fuel/kerosene)
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