By Rhod Mackenzie
The exports of diesel fuel from Russia in the first half of the year, despite the EU embargo and the price ceiling, increased by 11% in annual terms. Turkey was the biggest buyer, followed by Saudi Arabia and Brazil, which cleared second in July. It is also actively developing deliveries to Africa, which already accounts for more than 20% of exports. Analysts note that the export of diesel fuel, despite the discounts provided, is more profitable for Russian oil companies than the export of oil.
Russian oil companies increased marine exports of diesel fuel and gas oil in the first half of 2023 by almost 11% compared to the same period last year, to an average of 1.055 million barrels per day, or about 26.16 million tons, according to Kpler data. In the first half of last year, the EU countries, the UK and Norway accounted for 77% of supplies, while in 2023 their share has dropped to around 9%. Before the introduction of sanctions for the outbreak of hostilities in Ukraine, the Russian Federation was the main exporter of diesel fuel to Europe.
After the launch in February 2023 of the price ceiling and the EU and G7 embargo on Russian oil products, most European countries stopped buying fuel from the Russian Federation. For diesel fuel and petrol, the maximum price was set at $100 per barrel, above which sanctions prohibited insurance companies, ship owners, and brokers from providing services for transactions with Russian oil. Due to restrictions on supplies to Europe, Russian oil companies faced rising costs and difficulties in logistics, and were also forced to offer discounts to attract new consumers.
As a result, the Russia had to redirect most of the fuel to other markets. And if in the first half of last year France, Germany, Great Britain, the Netherlands, Belgium and Poland were the largest importers of Russian diesel fuel, this year they have been replaced by more exotic destinations. Turkey became the largest buyer of Russian diesel fuel in the first half of the year with a share of 30%, although in the same period last year its share in purchases was only 8%. At the same time, about 11% of exports went to Saudi Arabia and Brazil, about 4% to Morocco, Tunisia, Egypt, Libya and the United Arab Emirates, and slightly less than 3% to Ghana.
For the past 20 years, the Russian diesel fuel market has been largely export-oriented, notes Kpler's Victor Katona: the idea was that Europe would be a net importer of this type of fuel over the next decades, and Russia would be the largest supplier. However, the situation has changed, because after the introduction of the ceiling, the Russian Federation had to find new markets, for example, in Turkey, Brazil (since July this has been the second largest export market for Russian fuel), recalls Mr. Katona. According to him, since February 5, after the start of applying the price ceiling, the maximum discount on Russian diesel fuel has fluctuated in the range of about $150-200 per ton, that is, about $20 per barrel. At the same time, in recent weeks, crack spreads for diesel fuel (the difference between the price of fuel and oil for its production) were estimated at a similar value. As a result,
Diesel fuel exports are growing in June-July due to the completion of spring refinery repairs and an increase in diesel fuel production at Russian refineries, says Mikhail Turukalov, an expert on the fuel market. In addition, he notes, freight rates and discounts on Russian-origin products have declined recently, making exports more attractive. According to the expert, the rise in the price of diesel fuel in foreign markets and the weakening of the ruble also support the export of diesel fuel from Russia.
This article originally appeared in Russian at kommersant.ru