European diesel cracks jump $7/b on India diesel export duty

1 Jul 2022

Quantum Commodity Intelligence - European diesel and gasoil prices and refiner margins rocketed on Friday after India imposed a $26 per barrel export duty on the fuel in a protectionist measure which will force Europe to buy more diesel from the Middle East and beyond.

After falling for four out of the past five sessions on rising Indian diesel imports, the ICE low sulfur gasoil futures – the benchmark gasoil contract in Europe – jumped nearly 6% by the 1630 London close to reach $1,223.50/mt.

That pushed the European low sulfur gasoil crack up $7/b to $49/b – unwinding two days of losses.

India had stepped up its diesel exports to Europe over the past three months to plug some of the supply gap caused when the bloc shunned Russian barrels following the war in Ukraine.

However, soaring domestic inflation prompted New Delhi to impose an INR 13/l ($26/b) on diesel exports and an INR6/l levy on gasoline and jet fuel.

The move will further tighten diesel supplies in Europe as the bloc will try to pull in more barrels from Middle Eastern suppliers such as Saudi Arabia and the UAE.

While European gasoil futures rallied, the EFS – the difference between the August gasoil futures versus Singapore August swaps – was static at -$5.3/mt, as Asian markets rallied in tandem with Europe as both hubs sought alternative distillate supplies.

While diesel cash differential over the ICE gasoil futures cooled, refiner margins still jumped with the crack for 10ppm diesel cargoes landed into Northwest Europe up $7/b to $64/b.

The 10ppm diesel cargo crack in the Med stood at $64.4/b, up $8.2/b, while the margins for jet fuel cargoes landed in northwest Europe rose by nearly $6.4/b to $52.4/b.

Diesel barges traded in the ARA hub followed higher, with the crack reaching $57.8/b, up over $7.4/b.

European gasoline margins were not impacted by the move as Europe is long gasoline, with the front-swap Eurobob crack marginally higher at $35.5/b.