Diesel exports to Europe at record high in Dec as flows shift from Latin America

“Reliance (RIL) has historically had a very healthy positioning in Latin America, specifically in the Brazilian, Argentinian, and Uruguayan markets, sending some 60,000 bpd of diesel there in both 2021 and 2022. Recently, that flow of product exports has been rendered quite difficult as US (United States) Gulf Coast refineries took over the Argentinian market. After losing out on Brazil which is now the second-largest buyer of Russian ULSD (ultra low-sulphur diesel), the US really needed to maintain some foothold in Latin America… that has come at the expense of Reliance,” said Viktor Katona, Lead Crude Analyst at Kpler.

India, the world’s third-largest consumer of crude oil, depends on imports to meet over 85 per cent of its requirement. The country, however, is a net exporter of petroleum products thanks to its refining capacity of 250 million tonnes per annum, or around five million bpd, which is higher than its domestic demand. While public sector refiners have traditionally been more focused on the domestic market, private companies, and RIL in particular, are seen as export-oriented refiners.

With Latin America not importing as much diesel as it earlier would from RIL, the company has more diesel available to dispatch to Europe, which continues to be a premium market for the fuel as it is still short of around 7,00,000 bpd of diesel on a net basis. The bulk of diesel consumed in Europe used to come from Russia. But with much of the West weaning itself off Russian oil and fuels, the continent started looking at other source markets, including India, for fuel imports.

“They (Europe) need to buy the product from somewhere, from someone. Their reliance on Russia has morphed into a reliance on India, the Middle East and the US,” Katona said.

As a large refining hub that has ramped up purchases of discounted Russian oil following Moscow’s February 2022 invasion of Ukraine, India now finds itself playing an increasingly prominent role in the global crude oil and refined products supply map. The trend is significant on various counts. From the global oil markets perspective, suppliers like India are helping maintain a demand-supply balance, while preventing extreme price shocks.

Europe does not want to buy crude as well as refined fuels and products from Russia. Countries like India, which is a major oil refiner, are playing their part in bridging the gap by buying Russian oil on one hand, and increasing supply of refined products to the continent on the other. That is the primary reason why much of the West, which at first seemed annoyed at India’s high purchases of Russian oil, has been largely comfortable with India’s rising supply of fuels to Europe.