NEW DELHI: India’s latest measures aimed at boosting domestic oil supplies could reduce its diesel and gasoline exports in the second half of the year, keeping global supplies tight and underpinning prices, traders and analysts said.

The world is grappling with tight gasoline and diesel supplies as Western sanctions have reduced exports from Russia while demand has surged in a post-pandemic recovery. India’s curbs follow similar measures taken by China that have reduced oil product exports from the world’s No. 2 refiner.

In order to reap record margins, India, the world’s No. 3 oil importer, has ramped up imports of cheap Russian oil and increased oil product exports.

However, the country announced on July 1 a windfall tax on local oil producers and refiners and imposed new restrictions on export volumes in a bid to increase local supplies to meet rising demand and raise federal revenues.

“The export tax hike could see third-quarter diesel exports come in 100,000 barrels per day (bpd) lower to 640,000 bpd on average than our original estimate before the policy changes,” consultancy Energy Aspects said in a note.

“Indian exports will not drop to zero as the new rules just make it relatively less economic to export while also putting a maximum threshold on private refiners’ export volumes.”

FGE expects a 40,000-50,000 bpd drop in Reliance’s total gasoline and diesel exports in the months ahead.