India has increased the export duties it will be charging on exports of diesel and jet fuel for the two weeks starting July 16, amidst concerns of a global fuel market tightening further due to the return of the Hormuz crisis.

Source: s.yimg.com

The export taxes on diesel and aviation fuel were nearly doubled per liter of the fuels, according to a notice from India’s Finance Ministry, which was released on Thursday.

India reviews its export duty policy every fortnight to account for the prevailing domestic and international market conditions, including supply and prices. This latest review, covering the period July 16 to July 31, has led to a hike in the levies on diesel and jet fuel exports.

As per the new export duty policy, India will now have a levy on diesel exports at 15.50 rupees ($0.16) per liter, up from 8.5 rupees. The jet fuel export taxes have also been hiked to 14.5 rupees a liter from 7.5 rupees in the first half of July.

Despite nearly doubled duties on diesel and jet fuel exports, the levies remain a fraction of the heights from the early weeks of the Iran war, when export taxes were three to four times higher than today’s amid spiking crude oil prices and a collective Asian scramble for crude oil supply not needing the Strait of Hormuz to reach buyers.

Analysts expect that the hiked export duties could curb some of high Indian fuel exports, which is not good news for the global fuel market that is already exceptionally tight on diesel stocks, amid a Russian ban on exports after Ukraine crippled Russia’s refining capacity in a months-long campaign of drone attacks.

"The real stress in energy markets is not in crude oil but in refined products," Ole Hansen, Head of Commodity Strategy at Saxo Bank, said earlier this week.

"While Brent has rallied back above USD 80, diesel, gasoil and jet fuel continue to command exceptionally strong premiums as low inventories, refinery disruptions and peak seasonal demand tighten product availability," Hansen added.

India’s Finance Ministry reviews its export duty policy every fortnight, which enables the country to adapt to the evolving global market conditions. The latest hike in export duties on diesel and jet fuel exports may have a significant impact on the global fuel market, which is already facing a shortage of diesel stocks.

The global fuel market is experiencing an exceptional tightness in diesel stocks, partly due to a Russian ban on exports after Ukraine crippled Russia’s refining capacity in a months-long campaign of drone attacks. This has resulted in a surge in premiums for diesel, gasoil, and jet fuel.

The hike in export duties on diesel and jet fuel exports by India may help to curb some of the high Indian fuel exports, but it may also have a negative impact on the global fuel market, which is already facing a shortage of diesel stocks.

The global fuel market is closely watching the developments in the Indian fuel market, as any changes in India’s export duty policy can have a significant impact on the global fuel market.