India's 2025 fuel exports may face heat from geopolitics, Houthi attacks

Attacks by Iran-backed Houthi rebels since October 2023 on ships crossing the Suez Canal have hurt sales of transport fuel shipments from India

Conflicts in West Asia and new refineries in Africa and West Asia may take the shine off India’s overseas fuel sales in 2025, a key contributor to the country’s exports, industry officials say and shipping data show. Overseas sales of gasoline, naphtha, diesel, and jet fuel rose marginally by 2.9 per cent on the year in 2024 to a record, ship tracking data show.

 

Attacks by Iran-backed Houthi rebels since October 2023 on ships crossing the Suez Canal, the shortest passageway for Indian diesel and gasoline shipments to enter western markets, have hurt sales of transport fuel shipments from India, with Europe and Americas-bound tankers taking a circuitous route around Africa. It is unclear if the Suez will be completely free for transportation this year because the Houthis have threatened to expand the conflict to other West Asian nations.

 

Reliance Industries is India’s biggest fuel exporter, with seven out of every 10 barrels shipped from India supplied by the company’s Jamnagar refinery in Gujarat.

 

State-run refiners mainly serve the Indian market and are marginal players overseas. Reliance declined comments.

 

Venezuela, Russia factor

 

What is also key to keeping Indian fuels competitive in export markets is the continuing availability of discounted fuels from Venezuela and Russia. The discounts, off European benchmark crude Brent, was as high as $20 per barrel in early 2024 for dirty, Venezuelan Merey grades, and around $3-$5 a bbl last year for Russian Urals grade, a much higher-quality, lower-sulphur oil, according to refining sources and customs data.

 

Indian private sector refiners Reliance and Nayara Energy accounted for 36 per cent of India’s Russian crude purchases last year. But Venezuelan supplies to India have dried up because of US sanctions — last year, Reliance, India’s main buyer of Venezuelan Merey, imported just 59,000 bpd, a fraction of its previous purchases.

 

The future of Russian oil supplies to India at discounted rates is uncertain because the incoming Donald Trump administration has proposed a peace agreement to end the Ukraine conflict. Any peace treaty will lead to withdrawal of sanctions, enabling Russia to resume supplies to European nations and deny discounts to India, two refining sources say.

 

Imports of Russian oil by Indian refiners declined by 19 per cent on the month in December to 1.45 million bpd but were flat from a year earlier, according to ship tracking data from Kpler, the Paris-based market intelligence agency. State-run refining officials speak of shortfalls in Russian crude procurement in both January and February. The situation over Venezuelan supplies is equally uncertain as the Trump administration has promised to tighten sanctions.

 

Fully-priced oil imports, coupled with the Houthi blockade of the Suez, will make it further difficult for Indian refiners to supply to western markets. Helsinki-based climate think tank CREA says price cap coalition countries, which have imposed sanctions on Russian fuels, imported 8.5 billion euros worth of oil products in 2023, which included 2.4 billion euros worth of diesel. India was a key beneficiary of the trade, CREA says.

 

India’s overall fuel exports in the January-December period of 2024 rose marginally from 2023 to 57.13 million tonnes. Shipments comprised light products including gasoline and naphtha, and middle distillates, which include diesel or gasoil and jet fuel. Reliance accounted for 72 per cent of India’s exports in 2024 followed by Russian Rosneft-owned Nayara Energy at 10 per cent, Kpler data show. 

 

New refineries

 

Commenting on the outlook for India’s overseas fuel sales this year and the dip in sales to Europe, Prashant Vasisht, Senior Vice President and Group Co-head for Mumbai-based ratings agency ICRA, says: “I think it is also because of startup of Dangote and other refineries. Dangote (in Nigeria) is huge and closer to Europe. Avoiding Suez also increases the time and cost of exports to the EU.”

 

Diesel is key to India’s exports, accounting for 46 per cent of overall fuel exports in 2024, followed by jet fuel at 16 per cent, both referred to as middle distillates, according to Kpler. After shipping a record 15.3 million tonnes of middle distillates in 2023 to Europe, or 43 per cent of all middle distillate exports, sales declined by around a quarter to 11.5 million tonnes in 2024.

 

Some of the shortfall was made up by increasing exports to Asia last year, but expansion of refining capacity in West Asia and higher exports by Chinese refiners will lead to more competition in Asian markets this year, industry officials say.

 

Besides volumes, there will be an impact on the value of fuel exports in 2025 because fuel rates and product cracks are lower globally, Vasisht says. The value of petroleum product exports declined by 17 per cent to $47.7 billion in 2023-24 from a year earlier despite an increase in volumes, according to oil ministry data. Exports also declined this fiscal in the April-November period by 8.5 per cent to $28.9 billion. The share of India’s fuel exports by value in total exports was as high as 12.7 per cent in fiscal 2022-23 before declining to 10 per cent this fiscal.

 

The incoming administration of Trump has urged the European Union to increase imports of fuels and LNG from the US or face punitive tariffs on exports.

 

The strikes by Houthis on tankers in the Red Sea have forced the likes of Reliance to send the vessels around the horn of Africa, increasing costs and travel time, ship tracking data show. As a result, the US has increased shipments of diesel to Europe in 2024, partly displacing Indian volumes. Exports of middle distillates from the US to Europe rose by 76 per cent in 2024 from a year earlier to 16.3 million tonnes, Kpler data shows.

 

A new refinery in Nigeria will start displacing Indian fuels in the African market, which is also a key destination for India’s diesel and gasoline — Dangote refinery in Nigeria, which was commissioned in 2024, has already supplied Africa with 2.5 million tonnes of fuels last year, a fifth of India's fuel sales to Africa.

 

China will have a product surplus this year because sales of gasoline have peaked while diesel is being substituted with LNG, Vasisht says. Slowing domestic use will prompt Chinese refineries to export more to Asian markets, he adds. Moreover, West Asia is expanding refining capacities, putting pressure on India’s exports.

 

Europe was traditionally importing oil products from neighbouring Russia prior to Moscow’s invasion of Ukraine in February 2022, but sanctions by western powers prompted consumers in Europe to seek suppliers elsewhere.

 

India stepped in by increasing middle distillate exports by 50 per cent in 2023 to a record 15.4 million tonnes, but Israel's invasion of Palestine in 2023 prompted Iran-backed Houthi rebels in Yemen to attack tankers in the Red Sea, effectively closing the Suez passageway. This has disrupted India's plans to substitute Russian fuels in Europe. Otherwise, Indian refiners could have stepped up exports and gained control of western markets. The US has been the biggest beneficiary of both the Ukraine war and the Houthi blockade.