Russian Diesel Ban to Tighten Asian Supplies in Q4

Russia’s decision to temporarily ban diesel exports from 21 September could move more Persian Gulf vessels to the West, which could tighten supplies in Asia during Q4 if the ban is not lifted, traders and industry sources said.

• The ban is expected to remove around 1mbpd of diesel from the market, equal to around 3.4% of global demand. It would also remove 150kbpd of gasoline exports according to S&P Commodity Insights estimations.
• "The Asian gasoil market could become very bullish with the ban. There are heavy turnarounds happening in Europe and the US, so buyers in Europe will likely have to pull barrels from Asia or the Arab Gulf," said a trader, adding that supply is expected to be tight in Asia in the fourth quarter even without the Russian ban.
• "The immediate effect would be buyers in Africa will be pulling more barrels from the Persian Gulf but if Arab Gulf cash differentials rise, Singapore cash differentials will soon follow," said a regional gasoil trader.
• Europe's shortfall in diesel, which has been exacerbated by reduced stockpiles and refinery maintenance, could improve East-West arbitrage economics in the coming weeks, trade sources said.
• "Given that part of the issue is due to constraints in refining capacity as well as tightness in the medium sour crude market, the ability to significantly increase run rates and increase middle distillate supply could be difficult," Warren Patterson, ING's head of commodities strategy said.
• "Inventories are mostly tight and global refining capacity has remained largely unchanged since 2019, with new capacity [is] offset by longer-term closures. This is happening at a time when demand continues to grow, leaving markets tight," Patterson added.