By Rowena Edwards and Ron Bousso
LONDON (Reuters) – European traders are racing to fill the region’s tanks with Russian diesel ahead of the start of an EU ban in February as alternative sources remain limited.
The European Union will ban imports of Russian petroleum products, on which it depends heavily for its diesel, by February 5. This will follow a ban on Russian crude taking effect in December.
Loadings of Russian diesel destined for the Amsterdam-Rotterdam-Antwerp (ARA) storage region rose to 215,000 bpd from November 1 to November 12, up 126% from October, said market analyst Pamela Munger senior at the energy analysis company Vortexa.
With few immediate profitable alternatives, diesel from Russia has accounted for 44% of total road fuel imports into Europe so far in November, down from 39% in October, according to Refinitiv data.
Although Europe’s dependence on Russian fuel fell by more than 50% before Moscow’s invasion of Ukraine in February, Russia remains the continent’s biggest supplier of diesel.
“The EU will need to secure around 500-600 kb/d of diesel to replace Russian volumes, replacements will come from the US as well as east of Suez, mainly from the Middle East and India,” Eugene Lindell, refining and commodity market analyst at FGE, said.
Russian diesel heading to ARA tanks is likely to be used up or sold quickly due to the backwardation of Ice diesel futures, where the current value is higher than it will be in the coming months, said Lars van Wageningen of Dutch consultancy Insights Global. .
Part of the influx comes as ICE Futures Europe bans low-sulphur diesel of Russian origin ahead of EU sanctions.
From November 30, traders must prove to ICE that no Russian product has entered tanks in the wider ARA region – including Flushing and Ghent – which will be used for delivery in January via the contract. eventually ICE.
Russian diesel can still arrive at ARA storage tanks in December, but must be moved to other tanks from which no deliveries can be made, according to ICE.
Some market participants expect little impact from the ICE decision given the low storage levels in the ARA for Russian and non-Russian diesel as well as lower volumes delivered.
“The volumes delivered at expiration are actually quite small…it just adds an extra layer of logistical challenge,” said Neil Crosby, principal analyst at oil analyst firm OilX.
In January 2022, 70,000 tonnes of diesel were delivered via emissions from the website of the Ice diesel futures exchange.
(Reporting by Rowena Edwards and Ron Bousso in London; Editing by Alexander Smith)