As Russian exports continue despite sanctions, helping output from China and India reach all-time highs in March, global diesel margins have fallen by about half since February, weighing on refiners' profits. Western sanctions and price caps on Russian crude and oil products introduced in December and February had been expected to tighten oil supplies globally. However, Russia continues to ship out low-cost oil, enabling its biggest clients - India and China - to boost their refining output and exports. Russian oil products, meanwhile, are being sent in high volumes to oil hubs to be stored and re-exported worldwide.

In addition, several new refining complexes are coming online this year in the Middle East and China, churning out more oil products for export and further depressing refining margins. India’s Reliance Industries, operator of the world's largest refining complex, said in its earnings call on Friday gasoil margins declined as Russian diesel supplies have stayed stable, while an abnormally mild winter in Europe led to a build-up in stockpiles. Following a decline in spot liquefied natural gas (LNG) prices from record highs, the company reported a decrease in demand for gasoil to replace natural gas in power generation.

Benchmark European diesel barge refining margins drifted to their lowest since February 2022 last week to about USD13.70 a barrel, according to Reuters assessments, pressured by high import volumes and the restart of French refineries after labor-related strikes. Like this, due to massive stocks and the fact that the arbitrage window to Europe has been closed for months, Asian gasoil margins fell by 31% in April to the lowest level since January 2022, trading at approximately USD 14 per barrel last week. A typical European refinery's profit on processing a barrel of Brent crude fell by around 71% to USD 3.56 a barrel in April, the lowest level since January of last year, while profit margins for refineries in Asia fell by about 57% to USD 2.54 a barrel in the same month.