Diesel fuel has become a significant advantage for private oil refining companies but has simultaneously created problems for state-owned oil marketing companies (OMCs). On Thursday, the margin from refining crude oil into diesel fuel slightly decreased after the G7 countries, under pressure from US President Donald Trump, agreed to release 100 million barrels of crude oil and diesel fuel from their reserves over four months.
Analysts believe that this volume may be insufficient to stabilize diesel prices, as it is equivalent to the global market's consumption for just one day. James Noel-Beswick, Head of Commodities at British Sparta Commodities, noted that despite short-term optimism regarding European and American diesel spreads and gaps, prices in the first quarter of 2027 appear undervalued even at current high levels. He added that several factors have strengthened the diesel complex: low diesel fuel stocks in the US, rising maintenance costs, approaching cold weather, and an export ban by Russia.
According to data from the Indian Ministry of Petroleum, the average international price for diesel fuel in September was $164.5 per barrel on FOB terms, nearly double the level from a year ago. Last month, gasoline averaged $136 per barrel, showing a 70% year-on-year increase.
The current diesel spread margin—the difference between the price of crude oil and the price of diesel fuel—is $50–$70 per barrel, significantly higher than the long-term average of $16 per barrel, according to Prashant Vasista, Vice President at Icra, an affiliate of Moody’s.
Reliance Industries, India's largest fuel exporter, stands to benefit the most from the rise in global diesel prices, followed by Nayara Energy, which is controlled by Russia's Rosneft and benefits from higher refining and export margins. Meanwhile, state-owned OMCs, led by Indian Oil, are struggling to control growing losses from fuel sales, sources in the refining sector reported.
A Reliance representative stated that the company does not comment on market news. The Delhi decision to reduce the ad-hoc tax on the export of diesel and aviation fuel in October also favors private refiners. However, the ad-hoc tax on diesel fuel this month is about $27 per barrel, allowing the government to withdraw at least a third of the refiners' export profits. Analysts note that Reliance Industries' refinery in the Special Economic Zone (SEZ) Jamnagar is exempt from this tax due to its status as an export entity.
Although the diesel boom opens up export opportunities for private and independent refiners, Vasista pointed out that it has also led to a missed opportunity of 20–30 rupees per liter of diesel sold through OMC petrol pumps. State refiners face increasing losses because their primary task is meeting domestic demand while maintaining controlled prices at gas stations, company officials reported.
These losses are exacerbated by strong domestic demand for diesel and gasoline during a period when global product prices remain high due to the eight-month war in West Asia. Diesel fuel sales rose by 5% year-on-year in September to 1.77 million barrels per day (bpd). Diesel fuel accounts for almost 40% of India's fuel basket. Fuel demand reached a record 2.14 million barrels per day in June, and gasoline consumption increased by 7% last month to 1 million barrels per day, widening OMC losses.
Diesel fuel commands a high premium in the current market following the escalation of the conflict in West Asia involving the Houthis and threats to global diesel supplies from the US and Russia, two of the world's largest exporters of this fuel. Russian President Vladimir Putin stated in Moscow this week that Russia will not supply diesel fuel to global markets until sanctions are lifted. China also suspended diesel exports this week, and the duration of this ban remains uncertain, reports the publisher Energy Intelligence from the UK. 'The loss of these volumes, especially diesel, will further tighten the already vulnerable global product market,' the publication quotes.