Asia’s diesel glut looks likely to worsen and may weigh on the profit margins of refiners as Indian processors seek to export more of the fuel and China is awash with a domestic surplus.
Refiners from Bharat Petroleum Corp. to Hindustan Petroleum Corp. issued a flurry of tenders over the past week to sell March-loading diesel, building on a boost in shipments from the nation last month. China also ramped up exports in February to the highest in at least three years, while South Korea is sending more fuel abroad. The countries have lifted shipments after their domestic supplies swelled amid sluggish demand and robust crude processing rates.
The Covid-19 pandemic has curbed industrial activity in some regions, with demand for diesel — also known as gasoil — lagging that of gasoline, which has rebounded strongly as people favor cars over public transport to avoid being infected. China’s domestic stockpiles swelled to the highest this year through the week ended Feb. 25, forcing more fuel into the export market.
“The issue remains that gasoil markets are globally oversupplied,” said Max van der Velden, an analyst at Wood Mackenzie Ltd. China’s diesel demand fell strongly in February, while crude processing rates at the nation’s refineries were “relatively firm,” he added.
China’s diesel exports averaged a daily rate of 550,000 barrels last month, 22% higher than a year earlier, while India’s shipments were up 15% year-on-year at 527,000 barrels a day