The expectation of a decline in Russia’s oil production and exports due to the sanctions imposed after the Kremlin’s war on Ukraine has also triggered a potential crisis in the global supply of diesel, a sectoral analyst said Monday.
Russia, the world's third-largest producer of oil and petroleum products, is also the world's largest oil exporter.
While Russia exports approximately 5 million barrels per day (bpd) of crude oil, exports of petroleum products such as diesel, gasoline, fuel oil and naphtha reach 3 million bpd. Diesel constitutes some 2 million bpd of petroleum products exported, while the global diesel demand stands at 30 million bpd.
As a subsequent reaction to the Russian war in Ukraine, with the halting of Russian oil imports by the United States and the United Kingdom and the withdrawal of many European oil companies from their operations in the country, a decrease of approximately 3 million barrels in daily oil production is expected in Russia.
It is predicted that the decrease in Russia's crude oil production and the decrease in the export of petroleum products may prepare the ground for the potential supply constraint in diesel.
London-based petroleum data company OilX senior analyst Neil Crosby told Anadolu Agency (AA) that the demand for diesel has increased especially in the United States, Organisation for Economic Co-operation and Development (OECD) countries, Europe and across Latin America, but refineries are having difficulty meeting this demand.
Stating that this situation started even before the war, Crosby said that the possibility of a major restriction in diesel supply increased with the war, "but this should be analyzed not only from the perspective of diesel but also from the crude oil supply.
"Russia has daily exports of 4.5 (million)-5 million barrels of crude oil and nearly 3 million barrels of petroleum products. There is currently no official embargo on Russian oil except for the U.S., U.K. and some small countries, but many companies stop buying Russian oil considering the reputational risk."
Therefore, he said, "the market does not yet know the real impact of the current situation."
"How much Russian exports will fall, we will see the real effect in a few weeks," he said.
Crosby noted that they monitor oil data daily and that Russia's oil exports decreased slightly at the end of March.
Explaining that if Russia's oil exports decrease by a few million barrels a day after a few weeks, Crosby said that the producers will first fill the oil stocks in the country.
"When the stocks are full, Russia will have to reduce production. Russian oil company Transneft said last week that there is already a surplus of stocks," he said, noting that the infrastructure is starting to have problems with the current production volume.
"This may lead to a decrease in oil production in a shorter time and faster than we thought," he said.
Crosby emphasized that a significant decrease in Russia's crude oil and diesel exports will deeply shake the global markets, especially in Europe.
The daily diesel demand is at the level of 30 million barrels, Crosby went on to say, noting that the decrease in Russia's diesel exports by 1 million bpd is a huge loss for the global diesel supply.
"Refineries in Europe will be most affected by the decline in exports, because the Druzhba pipeline, which carries Russian oil, directly feeds refineries in Central and Eastern Europe."
He said that it is very difficult to find the same amount of alternatives for these refineries in a possible halt in Russian supplies.
"We are talking about 800,000 barrels per day here. The different sources from which this amount can be supplied are very limited. This directly affects diesel production," he underlined.
Crosby added that since Russia is not only a crude oil exporter but also an important diesel supplier, the loss of supply in Russia will be reflected in prices and for consumers as well.
Turkey’s diesel supplies
Turkey's diesel consumption last year amounted to 26 million tons.
While the total diesel production reached 17 million tons, the imports were around 10.5 million tons. About 3.7 million tons of Turkey's diesel imports were supplied from Russia.
Meanwhile, Turkey exported approximately 2.5 million tons of diesel in 2021.