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This is probably internal if you have tried good moisturizers and the corners of your mouth are cracking.
If you do not drink enough water, you are dehydrated. Drink, drink, drink. You should drink 8 glasses of water a day and keep yourself hydrated. For now, you should get something like gatorade and drink it.
This does not say that this is the entire problem. If you continue to have this problem, you need to see a doctor.
Your body is approximately 95% water and if you do not drink enough to replenish, you will have dry skin, dry corners of your mouth, etc.
I hope this is all the problems you are facing here. If it does not heal, please get an appointment to see your regular doctor.
The diabetic part is something you did not share with me. There could still be a multitude of other reasons since you have this condition - that are internal in nature and not just "dry skin." I still would suggest drinking something that will hydrate your body that will be in line with your diet.
Are you following your diet? How is your blood sugar level?
If this condition continues, it would be to your benefit to contact your doctor. As you are aware, diabetics have specific issues to consider. For instance, you should not have a pedicure except for by a trained professional.
As for any other considerations on this issue, I hope that one of our RNs on this site will be able to assist you.