Ahmad Ghaddar and Ron Bousso

LONDON (Reuters – European diesel imports are expected to decline in April, but they will be higher than those coming from other countries. It highlights the problem European governments face while considering new sanctions for Russian oil.

According to Vortexa data, diesel deliveries to the United States, Asia and the Middle East are expected to reach their highest level in three years by April. This is due to traders trying to replenish depleted stocks as well as to reduce the dependence of the United States on Russian oil.

Although the European Union has so far not targeted oil from Russia as its largest supplier, traders and refiners are opting to decrease their Russian crude and refined product purchases in recent months.

EU officials are currently evaluating the cost of replacing Russian oil imports with those from other sources as they prepare a sixth set of sanctions against Russia.

Robert Habeck, Germany’s Economy Minister, stated Tuesday that Germany hopes to locate a way to quickly replace Russian oil by other resources.

Recent weeks have witnessed a significant increase in European diesel inventory due to Russian imports. Stocks in the Amsterdam-Rotterdam-Antwerp hub are their lowest since 2008, data from Dutch consultancy Insights Global shows. [ARA/]

With Europe’s diesel supply falling behind Europe’s demand, traders reacted quickly and booked numerous tankers from across the globe to transport the fuel into Europe.

According to Vortexa data, combined imports from the United States, Asia and the Middle East are expected to reach 760,000 barrels per hour (bpd), in April. This is their highest level since August 2019.

The data also showed that diesel imports from Russia will reach 770,000 barrels per day, which is their lowest level since December and far below the record of more than 1 million set in April 2021.

GRAPHIC: European diesel/gasoil imports https://graphics.reuters.com/OIL-DIESEL/znvnemxbjpl/chart.png

GRAPHIC: European diesel/gasoil imports https://graphics.reuters.com/OIL-DIESEL/egvbkeoyrpq/chart.png

DIESEL PREMIUM

After Moscow invaded Ukraine, February 24, profit margins in European diesel refineries reached an all time high.

Janiv Shah from consultancy Rystad Energie, an analyst, stated that high imports can be attributed to both the maintenance of European refineries and increased production at large Indian refineries. These refineries are able to take advantage of cheap Russian crude and big profit margins.

According to a trader, Russian diesel imports are largely being shipped via the Baltic ports (including Primorsk) into the ARA storage facility, where they will be mixed with fuels from other sources.

Some traders also bought more Russian diesel in anticipation of a May 15 EU deadline that would limit oil purchases by major Russian oil producers to what is “strictly required” for Europe’s energy security. Traders said.

However, they stated that European diesel imports to May remain very low.

The International Energy Agency (IEA) has found that nearly half the Russian crude and petroleum product exports are headed to Europe.

It will prove difficult and expensive to cut off Russian oil. Europe will need to be able compete with other countries for more fuel and will pay more freight, according to a trader.

One trader stated that technically, Russia can be eliminated if Europe paid a $100 premium.