Russia Imposes Indefinite Ban On Diesel Exports, Analysts Voice Concern Over Global Shortage

The Russian government, via a decree signed by Prime Minister Mikhail Mishustin, introduced the ‘temporary’ restrictions on diesel exports to help stabilise fuel prices in the domestic market. 

Market analysts noted that the ban poses a risk of disrupting fuel supplies ahead of winter and further threatens the global fuel shortages being faced currently

Source : Getty

Russia placed an indefinite ban on diesel and gasoline exports to most countries on Thursday. The government, via a decree signed by Prime Minister Mikhail Mishustin, introduced the ‘temporary’ restrictions on diesel exports to help stabilise fuel prices in the Russian domestic market. 

Market analysts noted that the ban poses a risk of disrupting fuel supplies ahead of winter and further threatens the global fuel shortages being faced currently, as reported by CNBC. The restrictions apply to all nations except four former Soviet states, namely Belarus, Kazakhstan, Armenia, and Kyrgyzstan. Russia has not provided an end date for the ban. Notably, global diesel inventories are already at low levels and Russia is counted among the world’s largest suppliers of diesel and exporter of crude oil.

The report cited experts who voiced concerns about the potential impact of the ban globally. Energy analysts stated that Russia could be looking at weaponising fuel supplies ahead of the incoming winter season and the lack of clarity in the government announcement leaves a lot of room for speculation as to when the country would decide on ending the ban.

Prior to the Russian invasion of Ukraine in February last year, Russia exported oil products at nearly 2.8 million barrels per day. ING’s head of commodities strategy, Warren Patterson, noted in a research note on Friday, “The middle distillate market was already seeing significant strength ahead of this ban with inventories tight in the US, Europe, and Asia as we head into the Northern Hemisphere winter.” 

He added, “The loss of around (1 million barrels per day) of Russian diesel in the global market will be felt and only reinforces the supportive view we have held on middle distillate cracks and as a result on refinery margins. How much upside really depends on the duration of the ban.”

Callum Macpherson, head of commodities at Investec, pointed out that Russia announced this ban with the intention to address ‘tightness and high prices’ in the domestic market, “where high oil prices combined with a weakened rouble, must be painful for Russian consumers.” However, the expert cautioned that this move by Russia seemed similar to it’s decision to disrupt gas supply to Europe in 2021, which was termed ‘temporary’ in the beginning as well.