Russia plans to cut diesel exports from its main western ports to almost nothing next month after the government banned sales abroad to control rising prices at home.
The loss of Russian supply threatens to further tighten a global diesel market that has rarely been tighter, further jeopardizing supplies of a fuel used by industry and cars.
Russia, among the world’s top exporters, plans to ship only diesel that was exempted from a ban imposed last month, according to industry data seen by Bloomberg. Even so, total shipments will be down dramatically compared to September.
There has been skepticism among traders about how aggressively Russia would be able to enforce the diesel ban it announced on September 21, with some saying an end point would quickly fill the country’s storage tanks and thus it should be reversed. A total shutdown until October, if it happened, would change that idea.
Diesel prices in Europe soared. Futures jumped to $1,012.75 a metric ton, up $17 from where they closed on Thursday. Russia is the world’s leading exporter of diesel fuel. Its premium on crude oil also increased.
Cargoes from Russian ports in the Black and Baltic Seas are forecast at nearly 223,000 thousand tons in October. However, this includes 210,000 tons from Belarus to load at Primorsk and 12,800 tons to load at Novorossiysk for Eurasian Economic Union customers. These flows are exempt from the ban, which was designed to reduce domestic fuel prices.
Fuel prices have risen around the world this year, partly due to cuts in supplies of diesel-rich crude from Russia itself. The production cuts were a response to Western sanctions after the war in Ukraine. Moscow followed with export cuts.
Minor deliveries
A government decree allowed minor deliveries of diesel to trade alliance partners of some former Soviet republics, humanitarian aid and transit, as well as shipments that already have cargo papers and are accepted by pipeline operator Transneft PJSC and Russian Railways JSC.
On Monday, the government also excluded bunker fuel, diesel fuels and some middle distillates from the ban.
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Diesel loading plans, in millions of tons
|
October
|
September
|
|
Baltic port of Primorsk
|
0.210
|
1.11
|
|
Baltic port of Vysotsk
|
0
|
0.236
|
|
Black Sea port of Novorossiysk
|
0.013
|
0.528
|
The October plan seen by Bloomberg shows only diesel shipments delivered to ports by pipeline. Smaller volumes can also be shipped by rail. Pipeline operator Transneft, which compiles the loading schedules, declined to comment.
Rising car fuel prices in Russia have become a major contributor to inflation, a potential political headache as the Kremlin prepares for presidential elections in March. Earlier this week, President Vladimir Putin urged his government and Russian oil producers to jointly resolve fuel supply and oil tax issues, less than a week after the cabinet unexpectedly imposed the ban of gasoline and diesel exports.
No end date for the ban has yet been set. While the move has already cooled prices on Russia’s main commodity exchange, pump prices continue to rise.
The government is ready to take “strict regulatory measures” if the situation does not change, Deputy Prime Minister Alexander Novak said Thursday afternoon, after his meeting with oil officials and executives.
These measures could be comparable to those in force in the fertilizer market, according to Novak. In December 2021, in a move to curb rising food prices, Russia introduced fertilizer export quotas and has been expanding them ever since.
Novak also instructed Russian customs and tax services to monitor exports of automotive fuel, and volumes stored at port facilities will be redirected to domestic supplies.
Russia’s energy minister warned that the export ban would not be lifted anytime soon.
–With assistance from Grant Smith and Rachel Graham.
