Russia tried to tackle the shortages in recent months but turned to export curbs to prevent a fuel crisis
27 September 2023 - 16:49
byNatalia Chumakova, Ahmad Ghaddar and Trixie Yap
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Moscow/London/Singapore — Russia said last week it had temporarily banned petrol and diesel exports to all but four former Soviet states in response to domestic shortages, a move that will disrupt global trade that has already had to adjust to Western sanctions on Russian fuel exports.
Russia eased some of the restrictions on Monday, saying it would allow the export of bunkering fuel for some vessels and diesel with high sulphur content.
But analysts say importers will still have to find alternative sellers until Russia can replenish its own stocks.
What is the cause of the problem?
Traders said the fuel market in Russia, one of the world’s biggest oil producers, was hit by a combination of factors including maintenance at oil refineries, bottlenecks on railways and the weakness of the rouble, which incentivises fuel exports.
Russia tried to tackle the diesel and petrol shortages in recent months but turned to export curbs to prevent a fuel crisis, which could be awkward for the Kremlin as a presidential election looms in March.
How big a problem is this for world fuel markets?
The diesel ban will have the biggest effect because Russia is the world’s top seaborne exporter of the fuel, just ahead of the US.
It shipped an average 1.07-million barrels per day (bpd) of diesel from the start of the year to September 25, accounting for more than 13.1% of the total seaborne diesel trade, according to oil analytics firm Vortexa.
It is a much less significant petrol exporter, shipping an average 110,000 bpd in the year to September 25, Vortexa said.
How long will the ban last?
Russia said exports will resume once it has stabilised its domestic market, but has not given a precise timeline.
Analysts, such as consultancy FGE Energy, said the ban on diesel could last up to two weeks before Russia replenishes its stocks and resumes exports.
Expectations for the length of the petrol ban vary. JPMorgan said it could last a couple of weeks until harvest season concludes in October, while FGE Energy said replenishing Russia’s petrol stocks could take up to two months.
Who will be most affected?
After the EU banned Russian fuel imports over Moscow’s invasion of Ukraine, Russia diverted Europe-bound exports of diesel and other fuels to Brazil, Turkey, several North and West African countries and Gulf states in the Middle East. Gulf states, which have their own major refineries, re-export the fuel. The Russian ban will change those flows again.
Diesel supplies from Russian ports to Brazil reached about 4-million tonnes in the year to September 25, compared with 74,000 tonnes in all of 2022, LSEG data showed. The Russian fuel replaced Brazil’s imports of diesel from the US.
A prolonged Russian ban on diesel exports could force Brazil to replace up to 400,000 tonnes of the fuel per month, market sources said.
Turkey was the top destination for diesel supplies from Russian ports after the EU embargo, which totalled about 7-million tonnes since the start of 2023, but it will still be able to buy Russian high-sulphur gas oil, traders added.
Where will alternative supplies come from?
African states are expected to turn to supplies of gas oil and diesel shipped from the Middle East, India and Turkey, trading and shipping sources said.
At least 132,000 tonnes of September-loading diesel will be heading to Africa from Oman’s new Duqm refinery, shiptracking data from Kpler and two shipbroking firms showed.
Latin American importers are likely to turn to the US Gulf Coast and the Middle East, traders said.
Diesel exports from the Middle East to Latin America were at an eight-month high of 315,000 tonnes, shiptracking data from Kpler and a shipbroking source showed.
Europe could also fill some of the gap left by the Russia petrol ban. Northwest European suppliers, which lost market share in West Africa to Russian supplies in 2023, could step in, FGE said.
What will the change in fuel trade flows mean for Europe?
Since banning Russian fuel imports, Europe has been seeking suppliers elsewhere, including from the Middle East. Competition for those supplies will now increase because of Russia’s ban, which will have a knock-on effect on Europe.
As a result, traders said they expected Northeast Asian refiners in China and South Korea to boost diesel exports to Europe.
China exported about 190,000 tonnes of diesel to Europe in September, with 45,000 tonnes scheduled to load in October also bound for Western countries, Kpler shiptracking data and data from one shipbroking source showed.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Russian fuel export ban will disrupt global trade
Russia tried to tackle the shortages in recent months but turned to export curbs to prevent a fuel crisis
Moscow/London/Singapore — Russia said last week it had temporarily banned petrol and diesel exports to all but four former Soviet states in response to domestic shortages, a move that will disrupt global trade that has already had to adjust to Western sanctions on Russian fuel exports.
Russia eased some of the restrictions on Monday, saying it would allow the export of bunkering fuel for some vessels and diesel with high sulphur content.
But analysts say importers will still have to find alternative sellers until Russia can replenish its own stocks.
What is the cause of the problem?
Traders said the fuel market in Russia, one of the world’s biggest oil producers, was hit by a combination of factors including maintenance at oil refineries, bottlenecks on railways and the weakness of the rouble, which incentivises fuel exports.
Russia tried to tackle the diesel and petrol shortages in recent months but turned to export curbs to prevent a fuel crisis, which could be awkward for the Kremlin as a presidential election looms in March.
How big a problem is this for world fuel markets?
The diesel ban will have the biggest effect because Russia is the world’s top seaborne exporter of the fuel, just ahead of the US.
It shipped an average 1.07-million barrels per day (bpd) of diesel from the start of the year to September 25, accounting for more than 13.1% of the total seaborne diesel trade, according to oil analytics firm Vortexa.
It is a much less significant petrol exporter, shipping an average 110,000 bpd in the year to September 25, Vortexa said.
How long will the ban last?
Russia said exports will resume once it has stabilised its domestic market, but has not given a precise timeline.
Analysts, such as consultancy FGE Energy, said the ban on diesel could last up to two weeks before Russia replenishes its stocks and resumes exports.
Expectations for the length of the petrol ban vary. JPMorgan said it could last a couple of weeks until harvest season concludes in October, while FGE Energy said replenishing Russia’s petrol stocks could take up to two months.
Who will be most affected?
After the EU banned Russian fuel imports over Moscow’s invasion of Ukraine, Russia diverted Europe-bound exports of diesel and other fuels to Brazil, Turkey, several North and West African countries and Gulf states in the Middle East. Gulf states, which have their own major refineries, re-export the fuel. The Russian ban will change those flows again.
Diesel supplies from Russian ports to Brazil reached about 4-million tonnes in the year to September 25, compared with 74,000 tonnes in all of 2022, LSEG data showed. The Russian fuel replaced Brazil’s imports of diesel from the US.
A prolonged Russian ban on diesel exports could force Brazil to replace up to 400,000 tonnes of the fuel per month, market sources said.
Turkey was the top destination for diesel supplies from Russian ports after the EU embargo, which totalled about 7-million tonnes since the start of 2023, but it will still be able to buy Russian high-sulphur gas oil, traders added.
Where will alternative supplies come from?
African states are expected to turn to supplies of gas oil and diesel shipped from the Middle East, India and Turkey, trading and shipping sources said.
At least 132,000 tonnes of September-loading diesel will be heading to Africa from Oman’s new Duqm refinery, shiptracking data from Kpler and two shipbroking firms showed.
Latin American importers are likely to turn to the US Gulf Coast and the Middle East, traders said.
Diesel exports from the Middle East to Latin America were at an eight-month high of 315,000 tonnes, shiptracking data from Kpler and a shipbroking source showed.
Europe could also fill some of the gap left by the Russia petrol ban. Northwest European suppliers, which lost market share in West Africa to Russian supplies in 2023, could step in, FGE said.
What will the change in fuel trade flows mean for Europe?
Since banning Russian fuel imports, Europe has been seeking suppliers elsewhere, including from the Middle East. Competition for those supplies will now increase because of Russia’s ban, which will have a knock-on effect on Europe.
As a result, traders said they expected Northeast Asian refiners in China and South Korea to boost diesel exports to Europe.
China exported about 190,000 tonnes of diesel to Europe in September, with 45,000 tonnes scheduled to load in October also bound for Western countries, Kpler shiptracking data and data from one shipbroking source showed.
Reuters
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