Key facts
- India's refineries have operated at 105% to 108% capacity utilization for the past six months.
- Demand for diesel is surging, contributing to tight international fuel markets.
- Refiners are prioritizing diesel production over jet fuel.
- Record high diesel cracks are attributed to Middle East tensions and supply losses from attacks on Russian refineries.
- MRPL plans to continue running its refinery above 100% capacity until March 2027.
India's refineries have been running at exceptionally high utilization rates, between 105% and 108%, over the last six months. This surge is driven by soaring domestic demand for diesel and a tightening global fuel market, exacerbated by ongoing Middle East tensions and supply disruptions.
Tarun Kapoor, an adviser in India’s Prime Minister’s Office, stated at the India Sugar and Bio-Energy Conference that the future of biofuels involves maximizing value from every available resource and expanding the market for ethanol and compressed biogas. India, a major crude oil importer, has faced higher prices for alternative supplies due to Middle East instability. The country launched a new fuel blend with an 85% ethanol component in June to reduce dependence on imported oil, a move Minister of Petroleum and Natural Gas Hardeep Singh Puri said would strengthen the rural economy and advance low-carbon mobility.
India's average crude import price has soared above $100 per barrel, mirroring the international Brent crude benchmark. The nation's crude oil import bill has increased significantly, with a 60% rise in the April-June quarter compared to the same period last year, and a 41% increase in July year-on-year, due to reduced Middle East flows and shipping risks.
Nandakumar Pillai, a director at Mangalore Refinery and Petrochemicals Limited (MRPL), indicated that most Indian refiners have complex designs enabling them to process a wide variety of crude oils and maintain high operational flexibility. MRPL, with a capacity of 300,000 barrels per day, is expected to continue running above 100% capacity until March 2027. Indian refiners are prioritizing diesel production over jet fuel to meet domestic demand, contributing to record high diesel cracks due to constrained supply from the Middle East and Russia.