Indian refiners could be well-placed to supply tightening fuel markets to the west of the country, because weaker domestic demand has coincided with strong refining margins and widening supply disruptions in the Middle East and Russia.
India's transport fuel exports will rise to 1.36mn b/d in September, predictive volumes from Kpler show, the highest so far this year, while rainfall across major parts of the country in September continues to cap domestic fuel demand.
Export economics are reinforcing the westward pull for Indian supply. The arbitrage for Indian gasoil exports to Europe rather than Singapore has remained firmly positive since late July and stood at around $20-22/bl in late September, according to Argus data. The spread briefly approached $25/bl earlier this month (see graph).
Gasoline showed an even stronger westward incentive in early September, when the differential approached $30/bl, but this has since narrowed sharply to around $2-3/bl. This leaves a clear incentive for gasoil to move west, just as supply disruptions in the Middle East and Russia are increasing demand for alternative supply in Europe and nearby markets.
The Argus arbitrage takes into account freight, India's export duty and the additional cost of moving products through the Red Sea, suggesting westbound gasoil economics remain attractive despite higher transportation costs and export levies.
The opportunity is also becoming more attractive because Middle East gasoline supplies are set to tighten. Disruptions at Saudi refineries and restrictions on flows through the Bab el-Mandeb could reduce availability to traditional buyers in east Africa and Pakistan.
Kenya is likely to turn to northwest Europe and India for replacement supplies if import costs increase, according to the head of Kenya's Petroleum Outlets Association, John Njogu.
Indian refiners have also been responding to shortages elsewhere, with sanction-hit Nayara Energy's 400,000 b/d Vadinar refinery exporting cargoes to Turkey, Brazil and other markets facing reduced Russian supplies.
And fuel supply could tighten further. The US administration is likely to pursue voluntary restrictions on gasoil flows, although it does not plan to impose a "blanket ban" on US gasoil exports.
Chinese oil firms are also likely to cut products exports from October if the government reimposes restrictions in response to tightening domestic fuel supplies.
Crude constraints
Crude supplies from Middle East are rebounding and look set to rise to 2.64mn b/d this month, from 1.66mn b/d in August, but slightly lower from the pre-war level of 3mn b/d in February, Kpler data show.
But shipping constraints especially since Saudi Arabia's 7mn b/d East-West crude pipeline was closed last week may constrain Indian refinery activity, potentially limiting the scope for a major rise in exports.
Privately owned Reliance Industries' (RIL) Jamnagar complex recorded its largest decline in refinery throughput in August, falling to 1.23mn b/d after a strong July, when it resumed gasoil exports to Europe.
The decline was driven by RIL's export-oriented refinery operating at just 70pc of capacity last month, while throughput at its domestic-focused refinery was largely unchanged.
Fellow refiner HPCL also halted operations at its newly commissioned 180,000 b/d HRRL refinery in Rajasthan last month because of delays in cargo arrivals.
This pushed combined throughput at Indian refineries lower to 5.2mn b/d in August after two consecutive months of increases, preliminary oil ministry data show.
Meanwhile, India's domestic transport fuel demand fell to 2.91mn b/d in August, the lowest since September 2025. Gasoil consumption dropped by more than 13pc to an 11-month low of 1.68mn b/d because monsoon rains curbed agricultural and transport activity, the data show.
India's ability to capitalise on the disruptions in the Middle East and Russia will largely depend on refinery runs recovering. Maintenance at IOC's Panipat and MRPL's Mangalore refineries is scheduled to end by late September, potentially increasing product availability.
Weak domestic demand, recovering refinery operations and stronger export economics could therefore position India as a more important swing supplier, redirecting gasoil and gasoline between Asian, Middle Eastern and Atlantic basin markets as regional supply disruptions reshape trade flows.
