Russia lifts pipeline diesel export ban

Restrictions on petrol exports remain in place. — Reuters

MOSCOW: Russia’s government has lifted a ban on pipeline diesel exports via ports, removing the bulk of restrictions it enforced on Sept 21.

Restrictions on petrol exports remain in place. Russia said on Sept 21 it had temporarily banned petrol and diesel exports to all but four ex-Soviet states in response to domestic shortages, a move that disrupted global trade that had already had to adjust to Western sanctions on Russian fuel exports.

What happens next?

The government said the lifting of restrictions applies to companies that supply at least 50% of the produced diesel fuel to the domestic market.

Russia produced 85 million tonnes of diesel last year, exporting some 35 million tonnes, including 25.6 million tonnes by Russian oil pipeline monopoly Transneft, according to LSEG data.Restrictions on railway diesel exports remain in place, with the exception on exports to some ex-Soviet states.

Transneft said it would resume diesel exports via ports in the Baltic Sea and Black Sea once it receives clearance from authorities and when suppliers are ready, TASS news agency reported on Oct 6.

A resumption of Russian diesel exports will have the biggest impact on Turkiye and Brazil, Russia’s two biggest buyers this year.

“With the lifting of the ban, Turkiye may not need to import more Asian diesel barrels, but ultimately, it depends on how quickly Russia’s diesel exports are restored,” said Vortexa’s head of Asia-Pacific analysis Serena Huang.

Traders expect the lifting of the diesel ban could mean Asian diesel cargoes which would have replaced Russian exports in Africa and Turkiye will now stay in the region, adding to already ample supplies.

European diesel futures spreads collapsed on the news. The six-month backwardation fell by nearly 30% to US$80.50 a tonne. Backwardation is a market structure where future prices trade at a discount to current prices, and usually indicates tight supply.

European benchmark diesel refining margins fell sharply on Oct 5 after daily Kommersant reported that the Russian government was ready to ease the diesel export ban in the coming days.The diesel east-west arbitrage economics have also been affected, with the spread – determined typically by the exchange of futures for swaps – falling to a discount US$54 per tonne yesterday after the announcement, a one-month low.

Traders said the fuel market in Russia, one of the world’s biggest oil producers, was hit by a combination of factors including maintenance at oil refineries, bottlenecks on railways and the weakness of the rouble, which incentivises fuel exports.

Russia tried to tackle the diesel and petrol shortages in recent months but turned to export curbs to prevent a fuel crisis, which could be awkward for the Kremlin as a presidential election looms in March. — Reuters