Given the depleted diesel stocks and the winter season, Europeans are particularly dependent on Russian diesel. The EU and UK together are major importers of Russian distillate. But the sanctions will come into force in February. So what?
Because the Europeans somehow want to get through the current heating season unscathed and the diesel stocks are low, the total embargo on Russian oil distillates such as petrol and diesel will not come into force until February 5th. Because diesel is still used as heating oil by quite a few households and is also used to fire generators to generate electricity. Diesel from Russia continues to play an important role for Europeans in seaborne imports.
in one Bloomberg Messageciting Vortexa data, states that 600,000 of the 1.34 million barrels per day (bpd) of diesel imports came from Russia between November 1st and 24th. This corresponds to a share of 45 percent. It is not clear whether the (actually illegal) ship-to-ship imports by the British were taken into account. What is clear, however, is that after February 5th, the Europeans and the British will need to import more than 500,000 bpd of diesel from other countries. That means they will have to compete with the rest of the world for diesel supplies. Because Russia is one of the most important diesel producers and there is not enough capacity at the refineries worldwide to compensate for such a failure.
It should be remembered that OPEC+ recently decided to reduce oil production by up to two million bpd. In any case, Russia already produces less than what is actually allowed under the cartel rules. But to put the whole thing in perspective: Russia is currently producing about 10 million bpd of oil, Saudi Arabia eleven million bpd. The Russians can process seven of these ten million bpd in their own refineries at full capacity, but the production volume was already around 900,000 bpd at the beginning of the year below the maximum possible. And not only that: At the beginning of the year, Europeans were still importing about 800,000 bpd of diesel/gasoil from Russia, for a total import volume of (depending on the time of year) 1.5 to 2.0 million bpd. This gap of about 300,000 bpd is also being felt in inventories at the moment.
Although will according to the International Energy Agency (IEA) built more refineries, but replacing Russian supplies will not be easy. The increased Chinese capacity would make it possible to process Russian oil and then export the distillates. But in doing so, the Europeans would above all strengthen the Chinese position. Is that intentional?