Asian gasoil profit margins plunged to a record low on Tuesday amid signs of surging exports from India, indicating how much the regional market is struggling from travel restrictions and lockdowns to prevent the spread of the novel coronavirus.
The profit margin, known as the crack spread, for benchmark gasoil with 10 parts per million of sulphur in Singapore, fell to $1.77 a barrel over Dubai crude on Tuesday, the lowest on record in Refinitiv Eikon data that goes back to January 2014. The margin has dropped 85% since the end of March.
India’s April gasoil exports closed at a four-month high of 2.73 million tonnes, compared with 2.53 million tonnes in March, according to Refinitiv oil research assessments.
Shipments from India, Asia’s largest gasoil exporter, rose as the country’s refiners grappled with an extended coronavirus lockdown that cut its domestic demand, pushing supply out to the regional market.
Indian state retailers’ gasoil sales dropped by 57% in April compared with a year earlier.
Two Indian gasoil traders said they expect Indian domestic demand to remain weak in May which will continue the trend of Indian supply flooding the regional market.
“India’s diesel demand for May also appears to be very bad,” said one of the two traders.
Indian refiners have cut crude processing rates in response to the lower fuel demand since the nationwide lockdown began on March 25 and has been extended to May 18.
“Weak demand domestically (in India) is forcing more supplies out onto the regional market, at a time when the market is poorly equipped to absorb them,” said Peter Lee, senior oil & gas analyst at Fitch Solutions.
Lacklustre industrial activity and disruptions to global supply chains could cut global gasoil demand by over 4 million barrels per day in the second quarter from the same period in 2019.
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