European imports of Russian diesel have surged in recent days, with the imminent entry into force of the European embargo on oil derivatives from Moscow.
And with growing fears that sufficient alternatives won’t be found for the continent’s needs, traders in Europe are scrambling to fill up reservoirs in the region before February (2023), according to the agency. Reuters.
The European Union is scheduled to ban the import of derivatives of Russian oil, by February 5 (2023), which it relies on to supply diesel, that is two months after the Moscow oil embargo scheduled for the December 5 (2022), according to what is monitored by the Nicchia energy platform.
Shipments of Russian diesel are increasing
Pamela Monger, a senior market analyst at energy analytics firm Vortexa, pointed to higher shipments diesel Russo destined for the Amsterdam-Rotterdam-Antwerp storage areas at 215,000 barrels per day in the period from November 1 to November 12 (2022), an increase of 126% compared to October (2022).
With no affordable alternatives available, Russian diesel accounted for 44% of total European imports in November (2022), up from 39% in October (2022), according to Refinitiv data.
It appears that Russia is still Europe’s largest diesel supplier, despite the continent’s declining dependence on Russian fuel, as the export share reached more than 50% before Moscow’s invasion of Ukraine in late February (2022).
Russian diesel replacement
See analyst, department head derivatives Reiterated in FGE Eugene Lindell, the European Union will need to secure around 500-600 thousand barrels a day of diesel to replace Russian supplies.
He added that most of these alternatives will come from the United States and the Eastern Suez region – which unites the Middle East, Asia and the Pacific – especially the Middle East and India.
Lars van Wageningen, director of research and consulting at Insights Global, said Russian diesel destined for storage in the Amsterdam-Rotterdam-Antwerp region is likely to be used or sold quickly, especially as current prices are higher than expected. in the coming months.
He stressed that the “ICE Futures Europe” exchange will ban low-sulfur oil derivatives from Russia before the European ban takes effect.
As of the end of November (2022), traders will need to prove that imports into the Amsterdam-Rotterdam-Antwerp region are free from any Russian products.
And Insights Global said the imports in next December will be used to negotiate the company’s future contracts for delivery in January (2023).
According to some traders, these measures will have little effect; Due to the decrease in storage levels in the region of both Russian and non-Russian diesel, as well as the decrease in the quantities transported.
Implications for the diesel business
The approximately 200 million barrels a year of diesel trade between the EU and Russia is expected to cease in the coming months.
With time running out, traders will have to cut supplies to meet the deadline.
Getting rid of Russian supplies won’t be easy, especially since then France It recently reduced its diesel production; due to strikes in the refineries, and this forced them to look for more supplies, while domestic production was underway Germany At risk, as it will become difficult for the Schwedt refinery to pass crude through the Druzhba pipeline.
The European Union is expected to offset Russian supplies by importing fuel from the Middle East, in light of the intensification of Kuwait’s Al-Zour refinery and Jazan refinery. Saudi Arabia production.
Additionally, China recently allowed an increase in fuel exports, and these quantities could be enough to replace Russian barrels.
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