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Indian refiners significantly reduced their use of crude oil vessels to ship refined fuels, such as diesel, to key European markets in May. This comes after volumes hit a near two-year high last month, according to trade sources and analysts.
The decline is attributed to rising inventories in the Antwerp-Rotterdam-Amsterdam region and unstable East-West diesel price spreads, making it less attractive for sellers to ship large volumes of industrial fuel to the West.
While this April’s surge in shipments from India to Europe helped support Asian margins, the reduced number of voyages in May is likely to push Indian refiners to redirect diesel sales back to Asia. This shift could worsen the supply glut in the region, analysts and traders indicated.
Data from Kpler, Vortexa, and LSEG shiptracking revealed that diesel exports using Suezmax and Aframax vessels—such as Mesta, Pertamina Halmahera, and Marlin Santorini, primarily from Reliance Industries’ Jamnagar refinery—reached around 380,000 metric tons (2.831 million barrels) in April, nearing a two-year high.
In February, shiptracker Kpler noted that 35 Aframax crude tankers had switched to carrying refined products instead of crude.
Traders opted for Suezmax and Aframax tankers, typically used for “dirty” crude oil and residue fuel, to transport “clean” refined products after freight rates for long-range (LR) tankers soared. The spike came after Houthi attacks on ships in the Red Sea, leading to longer voyages and tighter vessel availability.
“This reflected the tight LR1 and LR2 clean product tanker market due to additional tonne miles vessels had to cover to avoid the Red Sea and the lack of available prompt tonnage,” explained Emma Howsham, Research Analyst at Wood Mackenzie. She added that weaker demand for dirty vessels, caused by refinery maintenance in the United States and Middle East, made it more economically viable to choose them over other options for shipping diesel.
Cost Considerations
The cost of shipping 65,000 tons of fuel on an LR1 tanker averaged $75 per ton in March and April from India to Northwest Europe, compared to $60 per ton in February, according to pricing data from SSY Tanker. Even after the expenses for scrubbing and cleaning a vessel to load ultra-low sulfur diesel, the cost was nearly double that of shipping up to 130,000 tons of fuel on a Suezmax vessel on a similar route, traders noted.
Traders who are major shippers of Indian-origin diesel have multiple discharge destinations available and the flexibility to use larger vessels, a Europe-based trade source said.
However, this trend declined in May, with no dirty tankers carrying diesel on the India-Northwest Europe route, according to shiptracking data. Analysts anticipate an oversupply of diesel in Europe.
“The economics for Indian refiners to supply to Europe via the Cape of Good Hope appear challenging as European supply looks ample in the coming months,” said Howsham.
