Russia has extended the ban on diesel exports for another month

Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance, commented to Business FM on the likely reasons for extending the ban on the Russian diesel export, and under what conditions it can be relaxed:

"There was no shortage of diesel fuel in Russia either in August or September. Based on the data that was available, production exceeded demand; there were problems with logistics, particularly with the delivery logistics to certain regions, and the export bans, as far as can be judged, were aimed precisely at mitigating these logistical problems, in addition to stockpiling, including for the winter period. We do not fully know what the market statistics for diesel fuel look like, but most likely, in October, the surplus supply should increase, which will create an opportunity for either partial or complete lifting of the restrictions, but it is difficult to say when this will happen.

Russian oil refining is heavily dependent on diesel fuel exports. The entire modernization of the refinery was aimed specifically at increasing the export capacity of diesel fuel, as there was a large European market and high demand in other regions: Africa, Asia, even Latin America. Therefore, the focus was on diesel fuel. The Russian oil refining industry has a large surplus of capacities, and they are about twice as large as the needs of the domestic market. As a result, as soon as the refineries start operating at a normal pace, the diesel fuel storage facility becomes very quickly overloaded; this overloading leads to an inevitable reduction in production, including the primary refining of oil, unless this export valve is opened”.