Russia is considering a total ban on diesel exports

Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance, commented to Business FM on the proposed ban’s potential impact on the Russian diesel fuel export to the global and domestic markets:

— Russia is a major supplier of diesel fuel, and to a very wide range of countries, to almost all corners of the world. Our petroleum products are exported to about 50 countries: Latin America, many countries in Africa, Asia, and the near abroad. Therefore, this is potentially negative news primarily for developing countries in Africa and Asia. I don't think this will have a decisive impact on the price dynamics. It depends largely on the ban duration. The situation with diesel fuel in Russia is noticeably better than with gasoline at the moment, and I think it will remain better in the next two to three months. This ban may be lifted ahead of schedule. In addition, the decisive factor now remains the dynamics of oil prices, which depends on the circumstances surrounding the Strait of Hormuz. Here, the Russian contribution to price growth can be identified as a separate factor, but still it is quite secondary, it seems to me. Diesel fuel is also trapped in the Strait of Hormuz. The Persian Gulf countries have been and remain major producers of diesel fuel, so much depends on whether these cargoes will go and where they will go. But in general, the global market for diesel fuel and naphtha — our two key products in terms of petroleum products, not counting fuel oil — remains in a supply deficit, it is quite stable and is associated with a long history of closure of old plants, a fairly steady increase in demand for diesel fuel. Therefore, the demand for Russian diesel fuel remains very high. And of course, its departure is definitely a negative factor for pricing.

— How long can the ban last?

— It depends on the situation in the domestic market — to what extent the balances that have developed now will be stable or will worsen. It is difficult to imagine a situation in which the production of diesel fuel in Russia will match the demand. After all, we produce twice as much of it as is needed for domestic consumption. Therefore, as a rule, even when earlier restrictions were imposed on the export of gasoline, diesel fuel was less affected. And now there are so many logistical problems that, probably, there are also noticeable problems with diesel fuel, but they are temporary.