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Russia plans to increase its diesel exports next month before European Union sanctions on crude oil start in February. Fuel shipments from Russia’s ports in the Baltic and Black Sea are set to increase to 2.68 million tonnes in January, good for an 8% month-on-month increase from December’s volume and the highest export rate since January 2020.
The European Union will ban Russian oil product imports by Feb. 5. This follows a ban on Russian crude that took effect in December.
Exports of Russia’s flagship Urals crude blend from the Baltic Sea ports will, however, fall to around 5 million tonnes this month from 6 million tonnes in November, thanks to an EU embargo on Russian oil and a Western price cap, according to Reuters calculations. Some estimates have predicted it could fall as low as 4.7 million tonnes.
The $60 per barrel price cap introduced by the European Union, G7 nations, and Australia allows non-EU countries to import seaborne Russian crude oil, but prohibits shipping, insurance, and reinsurance companies from handling cargoes of Russian crude unless it is sold for under $60.
Traders have reported to Reuters that Russia is struggling to fully redirect Urals exports from Europe to other markets such as China and India India and is also having a hard time finding enough suitable vessels.
Russia’s problems have been compounded by a shortage of non-western tonnage, moderate demand for the grade in Asia, especially in China and a weak export economy. Indeed, Reuters has reported that Russia’s pipeline monopoly Transneft has been unable to fill some of the available loading slots due to a lack of bids from producers, while other slots were postponed or canceled. Only China, India, Bulgaria, and Turkey are currently willing to buy Urals, with the blend now being sold to export markets at below overall production cost, including local levies.
By Alex Kimani for Oilprice.com
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Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.