Russia Lifts Diesel Export Ban That Disturbed Global Markets

Russia has allowed the return of maritime diesel exports just a few weeks after imposing a ban that stirred global markets and has decided to find a different way to maintain sufficient fuel supplies, Bloomberg reported. Deliveries can continue provided that the fuel is delivered to national ports via pipeline, according to a statement on the government’s Telegram account. Otherwise, such flows to Russian western ports constitute the majority of diesel exports.

This will be a great relief for importers after Russia, the largest single maritime exporter of diesel fuels, imposed an almost complete ban on deliveries on September 21. This followed a rise in domestic fuel prices that spurred inflation and created a potential political problem for the Kremlin ahead of presidential elections in March.

The delivery ban has raised European prices in an already tight market. Refineries around the world are struggling to produce enough fuel after Russia and Saudi Arabia halted deliveries of crude oil rich in diesel, causing a reduction in supplies, Bloomberg reports.

The updated regulations are expected to free up about 90 percent of maritime volumes prior to the export ban, or about 630,000 barrels per day, according to estimates by Viktor Katona, chief oil analyst at market research firm Kpler.

However, the new rules stipulate that producers must keep at least 50 percent of their diesel production at home. Taking the large exporter Surgutneftegas PJSC as an example, the company would need to retain about 55,000 barrels of the daily volume it was selling abroad, Katona said.

Transneft PJSC, the Russian operator of oil and product pipelines, did not immediately respond to a request for comment on current shipments.

Subsidies for Refineries Are Returning

The benchmark European diesel premium over crude oil, a key metric for traders known as crack spread, fell on Friday to as low as $23.55 per barrel, the weakest since July. Since then, it has recovered and is still significantly above seasonal norms.

Exporters who do not produce their own diesel but deliver quantities purchased on the domestic market will now have to pay a high export duty, the statement said. This has been set at 50,000 rubles (almost $500) per ton, close to the current price of Russian inter-seasonal diesel on the national commodity exchange SPIMEX.

The government is also fully restoring its subsidies to refineries to ensure domestic fuel demand is met and to compensate refineries for the difference between domestic and foreign prices.

It is worth noting that last month, it halved payments of several billion rubles to curb budget spending burdened by the rising costs of the war in Ukraine. However, this move was criticized by President Vladimir Putin, who stated that the reduction worsens the situation in the domestic fuel market.