Diesel fuel (DT) is the main commodity in our oil product export basket, with Brazil being one of the primary importers. The only countries purchasing more are Turkey and China. One of the reasons cited in the media for the decline in export volumes to Brazil is the restriction on diesel fuel exports from Russia to non-producers, implemented in October of this year. This theory is somewhat corroborated by external data from the Finnish Centre for Research on Energy and Clean Air (CREA), which records a decrease in the volumes of oil product exports from Russia since September of this year. According to CREA, November exports of Russian diesel to Turkey (the largest importer) fell by 27%. However, while statistics are undeniable, their interpretation can vary significantly. The simplest explanation is not always the correct one.
Likely, the primary factors behind the decline in exports are not export restrictions on diesel for traders but rather reduced refining volumes in Russia due to drone strikes on oil refineries (NPPs), the need to meet domestic market fuel demands, and the tightening of sanctions imposed by the US and EU.
Russia’s demand for oil products is below the capacity of our refining industry, particularly for diesel, highlights Yuri Stankevich, Deputy Chairman of the State Duma Committee on Energy. Diesel production volumes nearly double the domestic demand. Moreover, the technological processes at NPPs are such that the structure of the product basket (petrol, diesel fuel, kerosene) cannot be fundamentally changed. Thus, our companies must seek markets to sell their goods, opting for the most optimal solutions while considering sanctions, logistical costs, demand dynamics across different continents, and prices offered by importing countries.
Exporting diesel over long distances, such as to Brazil, is not particularly profitable in poor market conditions, and for non-producers – traders – it becomes doubly unprofitable since they are essentially buying the commodity, explains Dmitry Gusev, Deputy Chairman of the Supervisory Board of the "Reliable Partner" association and a member of the expert council for the "Fuel Stations of Russia" competition. Such deliveries can only be of interest to large domestic oil companies, and no one has prohibited them.
It seems the partial export ban on diesel will be lifted once the rise in prices within Russia ceases.According to Sergei Tereshkin, CEO of Open Oil Market, diesel deliveries to Brazil from Russia are expected to show a decline from the beginning of 2025. Their dynamics are influenced by the increased attention from the US on the South American region this year. The risks of sanction violations pertaining to leading Russian oil companies have grown for Brazil.
He believes the future dynamics of exports will heavily depend on the geopolitical context. A sharp reduction in diesel exports to Brazil will not occur due to the aforementioned lack of a direct export ban, although fluctuations in volumes are possible.
Serguei Frolov, managing partner at NEFT Research, shares a similar viewpoint. Russian diesel is in demand on the world market, and additional volumes will find their market niche once all restrictions are lifted. However, domestic market supplies remain the top priority, he stresses.
Though diesel has decreased in price in the market since the October peaks, retail prices are still rising. The rate of price increase has slowed, but by early winter, it had risen by 1.1% by December 15, according to Rosstat. Most likely, the partial export ban on diesel will be lifted once price increases stabilize. Meanwhile, petrol prices are currently decreasing both wholesale and retail, but the volumes exported remain relatively small (at a peak, 15% of production).
Regarding Turkey, it currently faces no less, if not more, pressure from the European Union and the US than Brazil. It is often referred to as a "laundering" destination for Russian raw materials. Unsurprisingly, following the latest US sanctions against our largest oil companies, Turkey sharply reduced its purchases not only of oil products but also of crude oil from Russia. The situation is further exacerbated by drone attacks on tankers in the Black Sea. The risk of losing cargo is too great.
Consequently, we now have to rely more on crude oil exports, although all experts agree that refined product shipments are more economically viable. As Stankevich observes, additional value is generated during the processing phase of raw materials.
However, as Gusev laments, our refining capacities are almost stagnant, and no new refineries are under construction. This endeavour requires substantial and long-term investments, which are unlikely given the current monetary and fiscal policy, thus leading us to export crude oil, the expert explains.
Source: RG.RU
