Russia has fully banned exports of diesel after Ukrainian drone strikes on its refineries triggered widespread fuel shortages and as the global energy market braces for more disruption in the Strait of Hormuz.
Russia’s Decision
Russian Deputy Prime Minister Alexander Novak announced the ban in a televised meeting alongside President Vladimir Putin, saying the decision was intended to “increase supplies to the domestic market.”
Russia had already imposed a partial ban that prevents non-producers, like fuel traders, from selling diesel abroad. Wednesday’s ban extends that restriction to producers, encompassing the entirety of the market, according to Natalia Losada, senior oil products analyst at Energy Aspects.
Global Impact
The ban comes at a difficult moment for the global energy market as the US-Iran ceasefire looks close to collapse, raising fears that the Strait of Hormuz — the narrow waterway through which one fifth of the world’s oil traveled before the war – will all-but shut once again.
The US has also reimposed sanctions on the sale of Iranian oil, depriving the global market of a potential boost to its overall supply.
“It’s pretty bad,” Losada said of the ban’s global impact. “On the other side we have (a geopolitical) crisis which is still not fully resolved and flows through Strait of Hormuz are still restrained.”
Davin Tonyan, senior research analyst at Kpler, wrote in a note Thursday that the ban adds “fresh impetus for (diesel) prices to climb” alongside renewed fighting between the US and Iran.
Tonyan noted that Ukrainian attacks had already suppressed Russia’s diesel exports, but that he expected the ban to be short-lived given the “cost of forgoing export revenue.”
Russia is the world’s second-largest exporter of diesel, behind the US, according to Kpler. Its biggest customers are Turkey and Brazil.
“Lower exports into these countries will mean (them) competing with Europe for US barrels (and those from the) Middle East and India,” Losada, at Energy Aspects, said.
Global benchmark diesel prices shot up almost 13% on Wednesday, though were down over 3% early morning ET, according to Intercontinental Exchange data.
Original reporting: El Paso News (HLL/CB) — read the source article.
