Global diesel prices spike as US hits Russia with new sanctions
By Ahmad Gaddar, Shariq Khan, Trixie Yap and Enes Tunagour
LONDON (Reuters) – Global diesel prices and refining margins rose after the latest round of U.S. sanctions on Russian oil trade, according to analysts and LSEG data.
On Jan. 10, the United States imposed its toughest sanctions yet on Russian producers and tankers to curb the world’s No. 2 oil exporter’s revenue over the war in Ukraine.
Many of the newly targeted vessels, part of a shadow fleet seeking to circumvent Western restrictions, were used to ship oil to India and China, whose refineries have benefited from cheap Russian imports banned in Europe since Moscow invaded Ukraine.
“Diesel [profit margins] “News of the sanctions are being followed, and we expect significant disruptions to Russian diesel exports,” Energy Aspects analyst Natalya Losada said, adding that Russian diesel exports from Gazprom Neft and Surgutneftegaz refineries are at least 150,000 barrels (b. the risk.
The premium for the benchmark European diesel contract for the first month rose to $50.25 a metric ton six months later, data from LSEG showed.
The diesel market was already in arrears, a term used for a market structure in which near-term contracts trade at a premium to later-delivery contracts, which typically means tight fast supply.
Diesel refining margins hit a five-and-a-half-month high of $20 a barrel on Thursday.
Cold weather in the Northern Hemisphere was already supporting diesel markets.
Asian diesel refining margins jumped 8% to $17 a barrel on Monday, the biggest increase since September, before easing to $16.50 a barrel on Thursday.
U.S. diesel futures rose more than 5% on Jan. 10, their biggest daily gain since October, and hit a six-month high of $111 a barrel on Thursday. First-month diesel is over $10 on a sixth-month contract, the biggest premium in nearly a year.
Traders and refiners are factoring higher crude costs into fuel prices and refineries, two Singapore-based trading sources said, adding that lower Russian diesel flows are unlikely to have a big direct impact on Asian markets.
Even with higher diesel margins, Asia’s complex refining margins have weakened as crude prices have risen at a much faster pace than refined product prices, a third source said.
Dubai cash prices are up 8.5% from last Friday, while Singapore gasoline February swaps are up just 5.5% over the same period.
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