India’s petroleum products (POL) exports are expected to be healthy, with shipments clocking 13 per cent M-o-M growth in the first three weeks of August, aided by weaker domestic demand and strong export demand, particularly from Southeast Asia and Africa.
However, exports from the world’s fourth-largest refiner are likely to soften beginning in September due to Autumn maintenance at some refineries as well as refiners stocking auto fuel ahead of the festival season, when domestic fuel consumption picks up after the seasonally low July-September.
“We are seeing a 13 per cent m-o-m increase in India’s refined product exports in the first three weeks of August 2023. However, this is expected to slow in October-November due to autumn maintenance,” Energy intelligence firm Vortexa’s Head of APAC Analysis, Serena Huang, told businessline.
India’s POL exports rose 8 per cent M-o-M and 15 per cent on an annual basis to 5.4 million tonnes (MT) in July 2023, aided by higher outbound shipments of diesel during the month, the highest so far in FY24.
Exports of high-speed diesel (HSD) rose a healthy 22 per cent m-o-m and 9 per cent y-o-y to 2.38 MT last month, which is the second highest in the 2023 calendar year (CY), after March (2.48 MT).
Export scenario
Huang noted that India’s m-o-m refined products uptick in August 2023 will be driven by diesel at 96,000 barrels per day (b/d), followed by jet fuel and kerosene at 92,000 b/d, and fuel oil at 40,000 b/d.
Kapil Garg, Founder and Promoter of Oilmax Energy, a privately owned oil and gas company, said “POL exports are expected to be healthy in August due to a seasonal slowdown in local fuel consumption increasing the availability of volumes for export and higher purchases from Singapore aimed at replenishing the island nation’s depleted inventories.”
However, he added that exports are expected to slow down in September primarily because some refineries, most notably some units of Reliance’s export-oriented Jamnagar refinery, are temporarily shutting down for maintenance works, but also due to the slowdown in demand for fuels observed in major economies, particularly Europe and China, and the likelihood of increased windfall taxes on diesel exports.
Marketing margins
In a report, ICRA said that higher international gasoline and gasoil prices compressed marketing margins for Indian oil marketing companies (OMCs) in the first half of August 2023.
“Increased product cracks of high-speed diesel (HSD) and aviation turbine fuel (ATF) supported the Gross Refining Margins (GRMs) in July-August 2023. However, weak global growth, inflationary pressures, slower-than-expected recovery of the Chinese economy and start-up of new refining capacities are likely to impact product cracks in the near term,” it added.
The increase in international gasoline/ gasoil prices has compressed the marketing margins of Indian OMCs in recent weeks. While the margins are still positive for motor spirit (MS), they have turned negative for HSD in the first half of August 2023, ICRA said.
“The reduction in marketing margins is likely to impact the operating margins of OMCs in Q2 FY24 vis-à-vis Q1 FY24. However, higher SAED (Windfall Tax) on HSD and ATF is likely to buoy the profitability of the OMCs for bought-out goods to some extent,” it added.
On August 14, the government increased the Special Additional Excise Duty (SAED) on HSD to ₹5.5 a litre (from ₹1/litre) and on ATF to ₹2 (from nil), while the duty on MS continued at nil. The increase in SAED followed the increase in international prices and crack spreads of HSD and ATF.