Some of the biggest crude oil exporters in the Middle East are significantly raising their diesel exports to Europe, which is scrambling for fuel amid a massive crunch after Russia invaded Ukraine.
The diesel crunch in Europe due to the sanctions on Russia has upended the oil product markets globally. Diesel refining margins have quadrupled since the beginning of the year as major buyers of diesel are either shunning all energy products coming from Russia or expecting some kind of embargo on Russian oil.
In a very tight market for distillates, Middle Eastern crude producers are ramping up diesel exports, which would alleviate the crunch and offset the loss of supply from Russia.
Diesel volumes from the Middle East to Europe in April are expected to more than double to 379,000 barrels a day (bpd), offsetting an expected loss of 166,000 bpd of Russian diesel supply, according to loading schedules and tanker-tracking data compiled by Bloomberg. The Arab Gulf’s diesel exports to Europe are set this month for their highest level since October 2020, per Bloomberg estimates.
Russia is still expected to be the single biggest supplier of diesel to Europe in April, with more than 600,000 bpd. Yet, the sanctions, self-sanctioning, and the threat of an embargo could further reduce Russian supply, exacerbating the diesel crunch in Europe.
Diesel exports out of Primorsk, Russia’s key fuel shipments port on the Baltic Sea, are likely to slump by as much as 30 percent in May, a loading plan seen by Bloomberg showed on Thursday.
Meanwhile, Europe risks being exposed to a “systemic” deficit of diesel supply that could worsen and even lead to rationing of fuel, the top executives of the world’s largest independent oil traders said last month. Diesel stocks globally were already low even before the Russian invasion of Ukraine, but the shortage has now been exacerbated by the lower global diesel supply from Russia.
According to Russell Hardy, chief executive at the world’s biggest independent trader Vitol, “The thing that everybody’s concerned about will be diesel supplies.”
By Tsvetana Paraskova for Oilprice.com
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