Key information
- Diesel prices have increased across Asia, Europe and the United States due to US sanctions against the Russian oil industry.
- US sanctions have led to a surge in diesel refining margins, reaching $20 per barrel, with an 8 percent increase in Asia.
- Russia’s oil exports are at risk of disruption, putting at least 150,000 barrels per day of diesel exports at risk.
Diesel prices jump in Asia, Europe and the United States
Diesel prices saw a significant increase this week in Asia, Europe and the United States. Factors contributing to the rise include sanctions recently imposed by the United States on the Russian oil industry and colder winter weather conditions that have boosted demand for heating fuel.
American sanctions
On January 10, the US government announced its toughest sanctions against the Russian oil sector. These sanctions targeted major Russian oil companies such as Gazprom Neft and Surgutneftegas, as well as numerous ships, traders, service providers, insurers and energy sector officials. As a result of these sanctions, the benchmark diesel contract in Europe reached its highest discount structure in ten months, according to LSEG data cited by Reuters.
Diesel refining margins reach record highs
Additionally, diesel refining margins jumped to their highest level in more than five months, hitting $20 a barrel on Thursday. In Asia, margins jumped 8 percent on Monday, the first day of trading after the announcement of US sanctions last Friday, before falling slightly later in the week. U.S. diesel futures prices also saw an increase, although the influence of cold winter weather on demand proved more significant than the impact of Russian sanctions.
Russia’s oil exports could be disrupted
Direct sanctions imposed on Gazprom Neft and Surgutneftegas, which operate refineries in Russia, are expected to disrupt these companies’ exports of petroleum products. Estimates from consultancy Energy Aspects suggest that at least 150,000 barrels per day of Russia’s diesel exports, from these companies, could be compromised.
-“Diesel profit margins are up following the sanctions news, and we expect significant disruptions to Russian diesel exports,” Natalia Losada, an analyst at Energy Aspects, said in an interview with Reuters. Analysts say the sanctions are expected to drive up costs associated with supplying crude to Asia, which could limit refiners’ profits due to rising oil prices.
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