The adverse impact of disruption to shipping traffic on the Strait of Hormuz (SoH), especially supply of jet fuel and diesel (gasoil) cargoes to Europe, offers Indian refiners a small window of opportunity, particularly for aviation turbine fuel (ATF).

Global real-time data and analytics provider Kpler pointed out that only a fraction (44,000 barrels per day) of Indian refined exports passes directly through the SoH. India’s export flows are thus not overwhelmingly reliant on the SoH.

In this context, disruption along the regional redistribution hubs such as the UAE and Singapore, opens up opportunities for Indian refiners to explore lucrative deals. “For instance, disruption in these routes affects supplies of jet fuel to Europe. The European markets are likely to offer better prices to Indian refiners in such circumstances,” said an analyst.

Evolving arbitrage

Sumit Ritolia, Kpler’s Lead Research Analyst for Refining & Modeling, emphasised that India is positioned as a “net exporter with strategic exposure”.

He said the deepening Iran–Israel conflict has sharply altered the refined product landscape. Over the past week, global gasoil cracks have surged, signalling tighter middle distillate balances.

Structural risks are emerging, particularly for Northwest Europe (NWE), which sources around 24 per cent of its gasoil imports from Middle East Gulf (MEG), exposing the region to potential SoH disruptions, Ritolia explained.

However, the real bottleneck lies in jet fuel and kerosene logistics, he said adding, that a disruption in SoH would disproportionately affect European aviation fuel logistics with limited global back-up capacity.

“Jet/ kero imports into NWE are 58 per cent dependent on Middle East supply via SoH, making them more exposed than diesel. With global refiners prioritising mogas production (gasoline) amid seasonal peak demand, there’s little spare capacity to pivot to kero, even if logistics permitted it,” he added.

With little capacity, the European buyers are even more likely to look for jet fuel supplies from India.

India’s pivot

Ritolia pointed out that India remains a major net exporter of refined products, particularly diesel and jet fuel, supplying markets in Europe (the Netherlands, France), South-East Asia (Singapore, Malaysia) and Africa (South Africa, Tanzania).

In this environment, Indian refiners will need to balance domestic obligations, commercial margins, and logistical risk in real-time. The weeks ahead may see more spot-driven behaviour, rapid route adjustments and a tilt in supply favouring markets offering stability and premium pricing.

Diesel and gasoil cracks are elevated, offering stronger export margins — especially for private refiners like Reliance Industries (RIL) and Nayara Energy, which actively serve European markets, Ritolia said.

However, a rise in crude prices due to regional conflict may offset some margin gains, particularly for refiners dependent on Middle East crude.

On market reorganisation, he said: “As freight rates and war-risk premiums rise, Indian refiners may pivot westward, focusing on Europe and West Africa. This could tighten diesel supply in Asia, where buyers like Singapore, Malaysia, and South Korea are heavily reliant on Indian volumes.”

More Like This

Published on June 23, 2025