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Russia sees no need to reduce its output of petroleum products as the EU embargo on imports of Russian fuels kicks in on February 5, Russian Energy Minister Nikolai Shulginov said on Friday.
“We will analyze what the effects of the embargo will be. So far we have no reason to believe that we will see a sharp reduction in the processing or production of petroleum products,” Russian news agency Interfax quoted Shulginov as saying.
Russia is not considering postponing or rescheduling refinery maintenance because of the EU embargo, either, the energy minister said.
The EU will ban—effective February 5—seaborne imports of Russian refined oil products and around 1 million barrels per day (bpd) of Russian diesel, naphtha, and other fuels need to find a home elsewhere if Moscow wants to continue getting money for those products. More than half of those Russian fuel exports to the EU are diesel. Ahead of the embargo set to kick in on Sunday, Europe continues to be the biggest buyer of Russian diesel, and it has been stocking up on Russian supply in recent months ahead of the ban.
There are a lot of uncertainties regarding Russian fuel supply in the coming months, the key being whether Russia can place the barrels displaced from Europe elsewhere and whether a planned price cap on Russia’s fuels would work as intended.
The European Union was considering setting a $100 per barrel price cap on Russian diesel to limit the potential fallout on global supply after the EU ban on Russian refined products comes into effect. Days before the EU ban is set to kick in, the EU is still at odds over a cap on the price of Russian diesel and other products. There are hopes that a deal could be reached on Friday, February 3.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
According to the Russian Energy Minister, Russia sees no reason to cut its oil product output. But even if it does, Russian petroleum products will still be reaching the United States and the EU as Chinese and Indian products refined from increasing imported volumes of Russian crude by both China and India. Alternatively, Russia could raise its crude exports equivalent to any cut in its petroleum products exports. For Russia, it is a win-win situation.
Moreover, any joint EU/G7price cap on Russian petroleum exports won’t fare better than the cap on Russian crude exports. Both will end up in a waste bin.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert