Background
India is threatening to overtake Saudi Arabia as Western Europe’s largest supplier of diesel and other refined products. India surpassed the Arab country’s fuel exports during four of the first 13 weeks of 2023, with the surge largely attributable to its record imports of cheap Russian crude.
Meanwhile, the European Union is proposing a crackdown on what it calls “deceptive practices” being used to bypass sanctions on Russia, including price caps and import bans on Russian crude and petroleum products.
The EU banned almost all seaborne crude oil imports from Russia in December 2022, followed by a price cap on Russian refined fuels two months later. The effort to cut Russia’s funding for its ongoing invasion of Ukraine has transformed the global crude and oil products trade.
The issue
India’s emergence comes as it purchases cheap Russian crude oil, refines it into diesel and ships it to Europe at a markup. Without access to cheap alternatives, European refiners are struggling to compete with China and India, the latter of which has become Europe’s top fuel supplier.
Indian purchases of Russian crude are at an all-time high — 2.4 million tons per week at the end of March, up from about 52,000 tons before the February 2022 invasion. Since the war began, state-owned and private refiners in the world’s third-largest oil importer have purchased over 40 million barrels of Russian crude oil.
India’s weekly exports of gasoline and distillates, including diesel, climbed as high as 428,221 tons in the week of March 24. By contrast, Saudi Arabian exports have declined in recent weeks, sinking more than 50% below its 2020 peak. Meanwhile, Western Europe’s imports of Chinese refined fuels peaked below 300,000 tons in late October and have declined in 2023.
Estimates for blended forward 12-month earning-per-share growth of Indian refiners range from 14.6% for the diversified Reliance Industries Ltd. to 189.6% for the pure-play Hindustan Petroleum Corp.
The outlook for Western European refiners is less positive, with forward 12-month EPS growth ranging from 2.7% at Finland’s Neste Oyj to -57.5% at Italy’s Saras SpA. Meanwhile, record earnings from Vitol Group and Glencore Plc highlight the opportunities for commodity merchants.
Tracking
Use Bloomberg’s DSET and WATC functions to track oil trades and see its impact on earnings. Run NSUB FFMSTORY to subscribe to functions-based stories.
For more information on this or other functionality on the Bloomberg Professional Service, click here to request a demo with a Bloomberg sales representative. Existing clients can press <HELP HELP> on their Bloomberg keyboard.
Bloomberg
Source link
