European traders are scrambling to fill tanks in the region with Russian diesel before an EU ban takes effect in February, as alternative sources continue to be limited.
The European Union will place sanctions on Russian oil product imports, on which it depends heavily for its diesel, by Feb. 5. That will follow a ban on Russian crude coming into effect in December.
Russian diesel loadings intended for the Amsterdam-Rotterdam-Antwerp (ARA) storage region jumped to 215,000 bpd from Nov. 1 to Nov. 12, a rise by 126% from last month, Pamela Munger, senior market analyst at energy analytics firm Vortexa, said.
With barely any immediate cost-effective alternatives, diesel from Russia has accounted for 44% of Europe’s total imports of road fuel so far this month, against 39% in October, Refinitiv data shows. Although Europe’s dependence on Russian fuel has dropped from more than 50% before Moscow sent its troops into Ukraine in February, Russia is still the continent’s biggest diesel supplier.
“The EU will have to secure around 500-600 kb/d of diesel to replace the Russian volumes, replacements will come from the US as well as east of Suez, primarily the Middle East and India,” Eugene Lindell, refining and products market analyst at FGE, said.
The Russian gasoil going into ARA tanks is expected to be used or sold quickly due to backwardation in Ice gasoil futures, where the current value is greater than it will be in following months, Lars van Wageningen, at Dutch consultancy Insights Global, said.
Part of the influx occurs as ICE Futures Europe bans low-sulphur gasoil of Russian origin prior to EU sanctions.
From Nov. 30, traders must produce proof to ICE that no Russian product has arrived in any tanks in the larger ARA region – including Flushing and Ghent – that will be used for January delivery through the ICE futures contract.
Russian gas/oil can still enter ARA storage tanks in December, but it must be transported to other tanks from which no delivery can be made, according to ICE. A few market players anticipate little impact from the ICE move given low storage levels in the ARA for both Russian and non-Russian gasoil along with decreasing delivered volumes.
“Volumes delivered upon expiry are actually pretty small … it just adds an extra layer of a logistical challenge,” Neil Crosby, senior analyst at oil analytics firm OilX, said.
In January this year, 70,000 tonnes of gasoil arrived through the ICE gasoil futures exchange’s website shows.