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EU ban on Russian petroleum products begins February 5
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Russian refinery output expected to decline
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Europe gets supplies before the embargo
By Swati Verma and Noah Browning
Feb 2 (Reuters) – The European Union’s ban on imports of Russian refined petroleum products, including diesel and jet fuel, will disrupt global flows once it takes effect on Sunday and could hurt Moscow more than an embargo on crude oil.
Although Western sanctions could force Russia to reduce crude production and refining cycles, which would further tighten global supply, some analysts have said banning the products may ultimately have little impact on availability. overall.
“The barrels will go out and find a market, a logistical challenge but not a supply challenge,” senior research associate Ian Moore told global brokerage Bernstein.
The biggest problem could be for Russia to find alternative buyers, since China and India, which have shown themselves eager to recover their crude oil at a reduced price, have their own refining capacity and are exporters of products. tankers.
“While the ban would leave Russia with more crude to export, there might not be enough destinations to export the surplus to, and so Russia might have to cut production by 5-10%,” said Pei Hwa Ho, energy analyst at DBS Bank.
In an attempt to compensate for the lack of European buyers, Russia stepped up diesel deliveries to African and Mediterranean ports in January.
But a lack of tankers to transport these products and a potential lack of demand could make it harder for Russia to divert refined fuels to third markets.
Europe has looked to producers in Asia, the Middle East and the United States to diversify its sources of supply, but sea transport will be more expensive due to the longer navigation time.
For now, supplies remain plentiful in Europe, which relies heavily on Russian diesel imports, with traders stocking up ahead of Western restrictions.
It is still unclear what the ceiling price of refined products may be because their pricing, much more complex than that of crude oil, is dictated by differences in quality, determined by the levels of sulfur and metals.
The EU has proposed a price cap of $100 a barrel for diesel and a cap of $45 a barrel for discounted products such as fuel oil, but member states have yet to agree on those levels, States aiming for a deal on Friday.
Approved by wealthy G7 nations, the European Commission and Australia, the product ban follows a similar measure they implemented on December 5, banning the sale, insurance and transportation of oil Russian crude unless sold below a price cap of $60.
(Editing by Barbara Lewis)
