EU seeks to replace 600,000 b/d of lost Russian diesel and imports – Argus

The EU's demand for diesel is about 6.5 million b/d and accounts for 40% of its total oil demand, according to Argus Media.

PHOTO: The Pernis refinery is Europe's biggest and an important producer of regional bunker fuels. Shell

EU sanctions on refined Russian oil products will kick in on 5 February and ban Russian diesel flows of 600,000 b/d into the region.

Europe has relied heavily on Russian diesel and gasoil imports, Argus’ associate editor Benedict George said in a webinar yesterday. He said that historically Russia has accounted for 40-60% of the EU’s total diesel and gasoil imports. These imports have held above 40% even after the Russian invasion of Ukraine, George added.

He argued that there are largely three ways for the EU to fill the gap left by a lack of Russian diesel barrels. One is increasing diesel imports from the Middle East and from other countries with large production like India, China and the US. The other two options are to increase diesel production at EU refineries or use measures to cut diesel consumption.

George thinks that EU countries will likely use a combination of these three options. However, there are different sets of challenges associated with these measures, he added. Ramping up refinery utilisation for domestic diesel production could lead to a significant rise in crude prices, which indirectly pushes diesel prices higher.

Even if EU refineries, including those in the ARA, maximise diesel production, it is unlikely to have a knock-on effect on bunker supply in the ARA hub, George says. That is because these refineries have a limited additional capacity to desulphurise marine gasoil into diesel, he added.

Similarly, importing large quantities of diesel from the US, Saudi Arabia, UAE or India can be difficult, as supply from these countries will be capped by their overall refining capacity. Additionally, the EU will be competing with existing buyers from these supplies from places such as Latin America for US diesel, and Singapore for Indian diesel.

By Nithin Chandran

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