London
DailyExpertNews
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The European ban on Russian diesel arrived painlessly on Sunday.
Although the EU cut off its largest supplier, diesel futures prices in the bloc fell 1.6% on Monday, representing a 20% loss over the past two weeks as demand in the region has weakened and countries’ efforts to stockpile before the ban started to bear fruit.
The price drop will be absorbed relief by millions of truckers, drivers and businesses across the continent who depend on diesel. About 96% of trucks, 91% of vans and 42% of passenger cars in the European Union run on this fuel, according to the European Association.
“When the ban came in, it was expected that the diesel supply to Europe would decrease, but that is not happening at the moment,” says Mark Williams, a research director at the consultancy firm Wood Mackenzie, told DailyExpertNews.
The diesel ban comes two months after the bloc imposed an embargo crude oil imports by sea from Russia, as part of a package of sanctions against Moscow over its invasion of Ukraine. Russia accounted for 29% of the region’s total diesel imports last year, according to data from Rystad Energy.
Countries have been preparing for the latest ban by increasing diesel imports from Moscow in recent months. European imports are up nearly 19% in the fourth quarter of 2022 compared to the same period last year, according to energy data provider Vortexa.
“Those stocks should serve as a buffer against the immediate loss of Russian diesel imports,” Williams said.
Demand across the block is also weak.
Data from OilX, an oil analysis company that, shows that diesel imports into Europe fell by 439,000 barrels per day between the beginning of November and the end of January compared to the same period a year earlier.
Analysts attribute the slump in part to warmer-than-usual weather in the region and high prices — despite recent declines, prices are still 10% above levels at the same time last year.
At the pump, the average cost of a liter of diesel in the EU was €1.80 ($1.93) on January 30, compared to €1.60 ($1.72) at the same time last year, data from the European Commission.
Neil Crosby, a senior analyst at OilX, told DailyExpertNews that “continued weak demand data” in Europe had helped it “significantly increase its gas oil stocks in recent months.”
Still, it may take several months for the full impact of the ban to be felt as Europe begins to import more diesel from suppliers further afield, with higher shipping costs.
The block already imports significantly larger volumes of diesel from the United States, the Middle East and parts of Asia, according to Wood Mackenzie’s Williams.
Still, those imports won’t be enough to “compensate for the loss of Russian barrels to Europe” once Europe depletes its stocks, he said, adding that prices relative to other importing regions could begin to pick up as of the third quarter of this year. to rise.
The impact of the ban on Russia may also be disappointing.
Moscow has managed to divert more of its diesel to other markets since July last year. According to Rystad Energy, exports to Turkey and North Africa increased by 154% between November and January compared to the same period a year earlier.
Jorge León, a senior vice president at the company, sees this trend continuing, he told DailyExpertNews, also predicting that Russian exports to South America will likely remain at a “marginal” level.
However, he added that the United States could redirect some of its current diesel exports to South America to Europe, “finding” Russian diesel.[ing] a home” in South America.
OilX’s Crosby noted that there are “much more” potential buyers for Moscow’s diesel compared to crude oil exports.
“Most Russian diesel barrels will succeed in reaching world markets,” he said. “The idea that Russian diesel will have a very hard time finding new homes is starting to lose credibility.”
– Julia Horowitz contributed reporting.