India’s Diesel Flood Draws Rare Sales on Crashing Local Demand
An assistant refuels a boat with diesel on the quayside in Puducherry, India. (Photographer: Sanjit Das/Bloomberg)

India’s Diesel Flood Draws Rare Sales on Crashing Local Demand

(Bloomberg) -- India’s diesel exports are expected to surge in April, with more companies such as state-owned refiners joining the selling spree in a rare move after domestic fuel demand collapsed due to a virus-led lockdown.

The nation is already one of Asia’s biggest diesel exporters but the crash in local consumption after the shutdown -- which has been extended to May 3 -- has led to refiners pushing more barrels into a saturated market. It’s a stark reversal from the start of the year when processors were importing large quantities of the industrial fuel to meet new emissions standards.

“We are exporting to keep our refineries running”, said R. Ramachandran, director of refineries at state-run Bharat Petroleum Corp. There’s still some demand for diesel from China but a further erosion in consumption is likely to lead to additional cuts to crude processing rates, he said.

India’s Diesel Flood Draws Rare Sales on Crashing Local Demand

India’s state-owned refiners typically produce fuel for domestic customers, leaving the business of exporting to privately-held companies such as Reliance Industries Ltd. and Nayara Energy Ltd. However, since the nation implemented the world’s biggest lockdown, state processors have had to push more diesel into the export market as local tanks rapidly fill.

The initial three-week lockdown started on March 25, clearing city streets of traffic and grinding factory operations to a halt. The nation’s three biggest state-owned refiners -- Indian Oil Corp., BPCL and Hindustan Petroleum Corp. -- have been forced to cut processing rates by as much as half and are predicting diesel demand will plunge by 40% in April from a year earlier.

Daily diesel shipments from all of India’s refiners are expected to reach 596,000 barrels this month, according to industry consultant FGE. While that’s lower than March, exports in April will be 19% higher from a year earlier. The shipped volume may slip to about 353,000 barrels a day in May due to a possible revival in demand after the lockdown is partially lifted.

Since the lockdown started, refiners including BPCL and Indian Oil have offered at least 619,000 tons of diesel to be loaded this month, according to tenders seen by Bloomberg. Some cargoes have prompt loading periods of about a week from the end of the tender period, compared with industry norms of about a month, or 15-20 days, after a tender has been issued.

“Indian national oil companies rarely offer exports,” said Senthil Kumaran, an oil analyst at FGE, adding it was a sign of how desperate the situation is.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.