European Union: Faced with a lack of substitute supplies, European traders are rushing to fill regional fuel tanks with Russian diesel ahead of the EU ban taking effect in February.
Imports of Russian oil products, on which the European Union relies heavily for its diesel, will be restricted as of February 5. The embargo on Russian crude will then take effect in December.
Russian diesel loadings in the Amsterdam-Rotterdam-Antwerp (ARA) storage area rose to 215,000 bpd from November 1 to 12, up 126 percent from October, according to Pamela Munger, senior market analyst at energy analytics firm Vortexa.
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Due to a lack of readily available, affordable alternatives, Europe imported 44 percent of all diesel so far in November, up from 39 percent in October, according to Refinitiv data.
Russia remains the continent's top supplier of diesel, despite plunging more than 50% before Moscow's invasion of Ukraine in February.
According to Eugene Lindell, market analyst for refining and products at FGE, "The EU will have to secure around 500-600 kb/d of diesel to replace Russian volumes. Replacement will come from the US as well as from east of Suez, mainly Middle East and India."
Due to backwardation in Ice Gasoil futures (LCOc1-LCOc7), where current prices will be higher in later months, Russian gasoil entering ARA tanks is likely to be used or sold quickly, according to Lars van Wageningen at Dutch consultancy Insights Global.
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Part of the flow has been brought by ICE Futures Europe's ban on low sulfur gas oil of Russian origin ahead of EU sanctions. Beginning November 30, traders must demonstrate to ICE that no Russian product is offered in any tanks in the larger ARA region, including Flushing and Ghent, to be used for January delivery via the ICE futures contract .
In December, Russian gasoil is still allowed to enter ARA storage tanks, but must be transferred to other tanks from which no deliveries are allowed, according to ICE.
Given the lower storage levels in ARAs for both Russian and non-Russian gas oil, as well as declining delivered volumes, some market participants anticipate little impact from the ICE move. According to Neil Crosby, senior analyst at oil analytics company OilX, "the amounts delivered at expiration are actually very small ... It just adds an extra layer of logistical challenge."
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According to the website of the Ice Gas Oil Futures Exchange, 70,000 tonnes of gas oil were delivered in January 2022.