SNAP ANALYSIS: India crude tenders may take edge off diesel cracks

London, (Quantum Commodity Intelligence) - The Indian Oil Corporation has issued two crude tenders for loading in the next month and a half – the first time in weeks that the company has sought to import additional volume and a move that could take some of the edge off rampant diesel cracks in Singapore.

Refiners in India have been cutting runs for the past three weeks, according to reports, as the country battles with a massive outbreak of Covid 19 that has seen the number of detected daily cases of the virus rise sixfold since the start of June.

With the country partially locking down to stem the rise of infections, demand for transport fuels has fallen, and likely exports of diesel alongside that.

Distillate cracks in Singapore have risen sharply over that period, with June 10ppm diesel nearly doubling since the start of March from $3.18/b to $6.03 on Wednesday, while jet kero cracks have risen from $1.03/b to $4.23/b.

The narrative around why jet kero cracks have risen sharply has been clear, with air passenger demand in Europe and the US picking up as the vaccination programme in those countries rolls out.

But June swaps for diesel have kept a healthy spread of between $1.50-2/b above jet kero for the past month – initially narrowing from $2/b the day after Delhi announced a lockdown on June 20 to $1.12/b by the end of April, before rising again to $1.80/b this week.

And that comes despite rising infections across Southeast Asia and rising stocks of distillates at key ports.

With infections starting to fall in India after a brutal month, these crude tenders may indicate a higher run rate and a return to exports sooner than anticipated an that may mean relatively lower cracks for diesel.