Russian diesel not yet finding new markets

Russian diesel and gasoil sellers are leaving it late to reallocate their product away from the EU, which is a week from banning the trade, with little sign of adequate new markets opening up.

Vortexa data show that, so far in January, around 33,000 t/d of Russian diesel and gasoil has loaded for African destinations and around 23,000 t/d has loaded for Turkey, respectively more than three times and 40pc above the daily average from 2022. But combined these still come to only two thirds of the amount loading for EU destinations in the same period.

Russia would need to more than double its loadings for Africa and Turkey in February to fully reallocate its exports into these two most promising markets.

Traders said it will not be possible to switch the bulk of Turkey's demand to imports, because that country's diesel needs are mostly met through domestic refining. Africa has a larger import need, but traders said some large non-Russian firms have already locked in long-term contracts there, making it harder for Russian firms to capture market share.

Latin America has the capacity to absorb Russian diesel in theory after the EU ban, as a large demand hub with a structural shortfall. But most traders said the heavy involvement of US oil and finance firms in the region mean appetite for trading with Russia is likely to be suppressed. Russian diesel and gasoil loadings for Latin America picked up to around 6,000 t/d in the first half of January, three times the average from 2022 but a tiny fraction of the overall market. Nothing has been recorded as loading for Latin America in the second half of the month, although not all has declared its destination so some may yet head there.

Some Russian high-sulphur gasoil from the Black Sea may go to the Middle East for further processing. Greece has taken much of this in the past, as a centre of refining capacity but not of demand. As an EU member, Greece will have to stop doing so from 5 February. One Medium Range (MR) cargo of gasoil has headed from the Black Sea to Fujairah, UAE, in each of the past four months, according to Vortexa.

By Benedict George