Russian oil refiners are cutting back production, Gunvor says

Archie Hunter and William Mathis 3/22/2022

(Bloomberg) — Russian refiners are trimming their output, threatening to exacerbate a European diesel market already in short supply, Gunvor Group Chief Executive Officer Torbjorn Tornqvist said.

“This is a global problem but for Europe it’s very hard because Europe is so short” of diesel, Tornqvist said at the Financial Times Commodities Global Summit.

Diesel is still flowing from Russian refineries to Europe but the trade is becoming more problematical. Shipping companies, banks and buyers are shying away from dealing with Russian energy products in what is being termed “self-sanctioning,” following Russia’s invasion of Ukraine.

“That will force Russian refiners to cut back, in fact we already see that,” said Tornqvist. “What does that mean? It means more crude oil will need to be exported instead of the products, and we believe that is not possible and will lead to cutbacks in Russian production.”

European diesel stockpiles are expected to fall to the lowest level since 2018 this month, according to an Energy Aspects presentation. Some 500,000 tons of Russian diesel exports are at risk in March, the analyst said, leave “physical supply tighter than ever.”

Diesel prices in Europe have surged in recent weeks. Earlier in March, gasoil futures traded on the Intercontinental Exchange jumped to a record as fears of supply disruption from Russia, Europe’s largest supplier, compounded an already tight market. Heating oil prices in Germany were up more than 50% week-on-week through March 14, according to data compiled by Bloomberg. 

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