The Russian EU embargo changes the route of diesel shipments
Just days before the European Union (EU) embargo on oil products from Russian refineries comes into force, the amount of diesel arriving in Europe from the Middle East and the US is increasing, while the Russian diesel finds new ports in Africa, Latin America and Asia.
The EU embargo on petroleum products in Russia will come into effect on February 5. On the same day, the G7 countries are expected to implement the application of maximum prices for these products.
WEST IS WORKING ON TWO DIFFERENT MAXIMUM PRICES
Although the price cap negotiations have not yet been clarified, Western countries are working on two different price caps, high-value and low-value refinery products.
US Treasury Secretary Janet Yellen, in her statement last week, said that applying a price cap to refinery oil products is more complicated than the price cap applied to crude oil, but studies continue on how will be the ceiling price for refinery products.
Trying to replenish their stocks before the embargo decision came into force, European countries increased their purchases of diesel, which is one of the largest items in imports of refined petroleum products with 2.5 million barrels per day. , both from Russia and from alternative sources.
According to the information received by the AA correspondent from the Vortexa real-time data monitoring company, Russia remains the largest supplier of diesel in Europe.
RUSSIA REACHES 25 PERCENT OF DIESEL IMPORTS
According to the calculation made by Vortexa for this entire month, based on data from January 1 to 23, as of this month, the supply of diesel from Russia to countries made up of the EU, Norway, Switzerland and the United Kingdom is around 615 thousand barrels per day.
Russia accounts for 25 percent of these countries’ diesel imports.
Russia was followed by Saudi Arabia, which exported 267,000 barrels of diesel per day to these countries in the said period, while US diesel exports to the same countries stood at the level of 156,700 barrels per day. .
Turkey’s diesel exports to these countries are 64 thousand barrels per day.
NO SIGNIFICANT DECREASE IN EUROPEAN IMPORTS FROM RUSSIA
Although European countries announced embargo decisions after Russia’s war in Ukraine, there has not been a significant decline in Europe’s diesel imports from Russia in the period of about a year since the start of the war.
While Russia’s diesel exports to the EU, Norway, Switzerland and the UK exceeded 800,000 barrels per day in February 2022, diesel exports fell below 500,000 barrels per day in September 2022 alone. .
MIDDLE EAST AND USA INCREASE MOST EXPORTS TO EUROPE
Saudi Arabia and the US are among the countries that have increased their diesel supplies to Europe the most since the start of the war.
Saudi Arabia’s diesel exports to Europe, which was 87 thousand barrels per day in February 2022, have increased continuously in the last 11 months and reached 267 thousand barrels per day in January 2023.
Diesel exports from other Middle Eastern countries to Europe, except Saudi Arabia, also showed an increasing trend after the war, reaching 180,000 barrels per day as of January 2023.
US diesel supply to Europe, for its part, reached 156 thousand barrels per day in January 2023 from 21 thousand barrels per day in February 2022, and reached the highest level in the last 2 years.
While Turkey’s diesel exports to Europe, which stood at the level of 30,000 barrels per day in February 2022, varied over the months, they reached their highest level in April 2022 at 77,000 barrels per day. day.
According to experts, the embargo decision is expected to fill the gap that will emerge from Europe, which is Russia’s main supply market, mainly with Asian, African and Latin American countries, while the countries of the Middle East and the US stand out. among the new suppliers in Europe. .
Chief crude oil analyst at data analysis firm Kpler, Viktor Katona, told Anadolu Agency (AA) that Russia remains Europe’s largest diesel supplier, but Russian diesel supplies fell by 170,000 barrels. per day compared to last month.
Expressing that despite this decline, European diesel imports from Russia reached the highest level of the last two years in December 2022, Katona said: “They probably all filled up their stocks before the sanctions came into force.”
THE SAUDIS HIDE THE SECOND DIESEL SUPPLY TO EUROPE
Katona stated that Saudi Arabia currently ranks second in supplying diesel to Europe and shared the following information:
“The United States is becoming an increasingly large supplier of diesel to Europe. US diesel exports to Europe this month recorded their highest level since October 2020.
In fact, the first expectation was that the Middle East, Asia and the US would fill the gap that would emerge from Russia among the supplier countries of Europe. However, diesel supplies from countries like Saudi Arabia and Kuwait have yet to fully increase. Capacity constraints and delays at the Al Zour refinery in Kuwait may be preventing this.
Saudi Arabia produces 1.3-1.4 million barrels of diesel per day, and 600 thousand barrels of this is the country’s own consumption. Saudi Arabia has to balance the rest of its production between its European and Asian buyers.
TURKISH REFINERIES HAVE A COMPETITIVE ADVANTAGE
Therefore, it is difficult for it to further increase its exports to Europe. Output from Kuwait’s Al Zour refinery, with a capacity of 615,000 barrels per day, appears to be mainly diesel, but the commissioning of the refinery’s second and third units appears to be delayed to the end of this year.
On the other hand, noting that Turkey is probably the country with the highest chance of being among Europe’s major suppliers, Katona said: “Because Turkey’s refineries are mostly diesel-oriented.
Turkey can send its own production to Europe and import diesel from Russia at a reduced price. At a time when global competition is intensifying, this situation will create a huge competitive advantage for Turkish refineries in terms of profitability.”
RUSSIA WILL REPLACE THE US IN THE SUPPLY OF DIESEL TO LATIN AMERICA
Katona explained that total diesel consumption in Europe is not expected to change significantly, but there have been changes to supply routes to fully meet diesel supply.
Stating that domestic demand from the US, which has a daily diesel production of 5 million barrels, is at the level of 3.8 million barrels per day, Katona said:
“The United States has a production of more than one million barrels for export. Historically, US diesel exports went predominantly to Latin America, particularly Brazil and Mexico.
Now we see that it has increased its supply of diesel to Europe. That means more Russian diesel will go to Latin America.”
Katon noted that countries such as Turkey, Egypt and Algeria could become hubs for Russian diesel so that global diesel supplies are not disrupted.
‘RUSSIAN DIESEL WILL FIND NEW PORTS IN AFRICA AND THE MIDDLE EAST’
Vortexa chief economist David Wech claimed that 400,000 barrels of the Middle East’s 1.4 million barrels of diesel exports per day went to Europe, saying: “150,000 barrels of the 1.2 million barrels of US diesel exports per day, Asia’s 1.4 million barrels 200,000 barrels per day exports go to Europe Looking at these figures we can say that Europe can find the diesel it needs in these markets Europe has already created a bottleneck in the global market by hardly reducing its diesel supply from Russia to date, but at the same time increasing its supply from other countries,” he said.
Stating that they predicted that Russian diesel will find “new ports” in Africa and the Middle East with the European embargo, Wech said:
“Currently, the better natural gas supply situation means there is no need for additional diesel for electricity generation and industrial use. On the other hand, a possible global recession amid inflationary pressures also limits diesel consumption. In summary, it seems that Europe will not find it difficult to meet its diesel supply needs despite the fact that prices remain high due to long-distance arbitrage. (AA)