Exports of petroleum products took a hit in November, weighed down by sluggish demand in developed economies, a rise in domestic consumption and a significant decline in cheap petroleum imports from Russia.

During the April-to-November period, petroleum product exports amounted to $44.61 billion a sharp drop from $55.02 billion in the same period last year, according to data from the ministry of commerce and industries.

These exports stood at $3.72 billion in November, down from $7.39 billion in the year-ago period.

Experts also attribute the downturn to softening demand in key markets and logistical disruptions along major supply routes, particularly in the Red Sea.
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With these headwinds persisting, they cautioned that a recovery may take a while.
“Lower product prices and crack spreads amid persistently subdued oil prices have played a role in the fall in export values.

Further, the Suez Canal blockade has also somewhat impacted the exports from India. It has been the usual route for exports to Europe, but now a longer route, via the Cape of Good Hope, is used,” said Prashant Vasisht, senior vice president and co-group head, corporate ratings, ICRA.

Refineries’ rise
“Also, several large refineries have come up globally including the Dangote refinery in Nigeria, which are better located to cater to the European demand, compared to India. Further, lower demand from the chemicals industry which uses petroleum products like naphtha, also may have impacted the overall exports,” he added.

Compounding the issue, India’s imports of Russian crude oil in November fell to their lowest levels since June 2022, according to a recent report from the Centre for Research on Energy and Clean Air (CREA).

India is a net importer of oil and consumes a large portion of its oil imports. However, the country also processes its crude oil imports into refined petroleum products, with Europe serving as one of its largest export markets.

India has emerged as a large buyer of cheap Russian crude since the Ukraine invasion in February 2022, with Russian oil imports skyrocketing to about 40% of the nation’s total oil purchases.

However, the trend saw a sharp reversal in November, as India’s overall crude oil imports dropped 11% month-on-month, with Russian crude witnessing the steepest decline of about 55%.

Meanwhile, the Red Sea crisis, which began in October 2023, with Iran-backed Houthi rebels disrupting trade in the area, has impacted Indian exports.

Container ships transporting commodities are bypassing the Suez Canal and rerouting around the Cape of Good Hope, resulting in increased costs and longer transit times for Indian exporters.

Spokespersons of the ministries of commerce and petroleum didn’t respond to emailed queries.

Crude down
Meanwhile, Brent crude traded at $74.80 a barrel on Wednesday, down from $75.89 a year ago.

According to a recent report from S&P Global Commodity Insights, India is set to end the year (CY2024) with its oil demand growth rate surpassing China’s, making it one of the fastest-growing consumption centres, a trend expected to spill over to 2025, prompting the South Asian country’s refiners to accelerate expansion plans and widen crude diversification.

“India will be the leading driver, along with Southeast Asia and other parts of South Asia, of the region’s future oil demand growth,” said Kang Wu, global head of macro and oil demand research at S&P Global Commodity Insights, in the report.

“In 2025, India is forecast to deliver a relatively faster growth in oil demand of 3.2%, compared with China’s 1.7%,” Kang Wu added.

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Business NewsNewsIndiaIndia’s petroleum exports plunge amid weak global demand, Red Sea disruptions

Source: Livemint