A combination of routine refinery maintenance as well as upgrading to meet the country’s new Euro-IV fuel standards has led to a recent uptick in Indian diesel imports since May. Tender data from Reuters indicates that India’s diesel imports from May to July have amounted to 790 kt so far, which is up by 248% y-o-y.

State-owned refiners IOC and HPCL have been importing 40-50 ppm sulfur gasoil cargoes since May to cover domestic shorts. On average, IOC has been importing around three 38-40 kt cargoes while HPCL has been taking two to three 65 kt cargoes per month. Our fixtures data indicates that barrels have been sourced from the AG, Singapore as well as Karimun (Oiltanking’s terminal). IE data shows that Singapore’s onshore middle distillate inventories stood at 12.4 mmb for the week to June 14, which is the lowest in more than a month.

Around 768 kb/d of CDU capacity (up by 175% y-o-y) and 134 kb/d of diesel hydrotreating capacity in India is expected to be offline from May to July. HPCL-Mittal Energy (HMEL)’s 180 kb/d Bathinda refinery has been shut since 30 April to raise its capacity by 28%. The delay in its start-up has led to continued spot purchases for July. Key units at IOC’s 274 kb/d Koyali refinery and CPCL (a subsidiary of IOC)’s 210 kb/d Manali refinery have also been shut for upgrading to meet Euro-IV specifications, leading to increased imports by IOC.

The boost in Indian diesel imports has helped to mop up some of the excess supply from China as well as the AG (due to a persistently strong EFS which has kept the East-West arb shut). With IOC’s heavy refinery maintenance program over Q3, India’s gasoil imports are expected to remain elevated in the coming months despite the monsoon season. This may lend some support to MR tanker rates in Southeast Asia. Lumpsum rates for the Singapore-Hong Kong route basis 40 kt have recently recovered from the year’s low of $230,000 to $240,000. The implementation of India’s GST on July 1 will not be imposed on gasoline and diesel.

Source: OFE Insights