Europe has hiked its diesel imports from Russia this month as the EU embargo on imports of Russian oil products starting on February 5 draws closer, oil flow analytics show. Less than three months before the embargo kicks in, Russia is still the biggest supplier of diesel to Europe, which will have to replace more than 500,000 barrels per day (bpd) of diesel supply after February, the International Energy Agency (IEA) says.
Russian diesel loadings bound for the Amsterdam-Rotterdam-Antwerp (ARA) hub jumped by 126% to 215,000 bpd between November 1 and November 12, Pamela Munger, senior market analyst at energy analytics firm Vortexa, told Reuters.
"While a flood of East of Suez diesel imports has improved Europe's positioning for the upcoming winter, Russia-Europe flows are rising again ahead of the 5 Feb EU import ban," David Wech, Chief Economist at Vortexa, wrote in an article last week.
EU and UK imports of diesel from non-Europe/non-Russian sources surpassed a massive 1 million bpd through October, driven by high supply from the Middle East and Asia, Wech said.
It is even more challenging to make calls about what will happen with Russian diesel after the EU embargo than with what would happen with Russian crude oil, the ban on which begins on December 5, according to Vortexa.
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Per the IEA estimates in its Oil Market Report for November, EU countries had reduced Russian diesel imports by 50,000 bpd to 560,000 bpd by October.
"When the crude and product embargoes come into full force in December and February, respectively, an additional 1.1 mb/d of crude and 1 mb/d of diesel, naphtha and fuel oil will have to be replaced," the IEA said in the report last week.
As the EU embargo on imports of Russian diesel enters into force, "The competition for non-Russian diesel barrels will be fierce, with EU countries having to bid cargoes from the US, Middle East and India away from their traditional buyers," the agency said.
"Increased refinery capacity will eventually help ease diesel tensions. However, until then, if prices go too high, further demand destruction may be inevitable for the market imbalances to clear," the IEA noted.
By Tsvetana Paraskova for Oilprice.com
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