Russia’s Diesel Exports to Slide in April

Exports of ultra-low-sulfur diesel (ULSD) from Russia will decline in April as refineries start two months’ worth of maintenance work, according to data seen by Energy Intelligence.

Looking only at the system of pipeline operator Transneft, next month’s ULSD will amount to some 600,000 barrels per day, down from 660,000 b/d that had been scheduled for March.

Rail-based exports could potentially add another 100,000-125,000 b/d, judging by past months, but assessing these shipments is complicated due to vast bottlenecks on Russia’s railroads. Plans for previous months have ended up way under target.

Russia is a major supplier of diesel for global markets, which are experiencing a tightness in middle distillates due to growing demand and a decline in refining capacity that took place during the pandemic.

No less important, the global diesel trade is undergoing a paradigm shift after the Feb. 5 embargo on Russian oil products by the EU. The EU imported more than 500,000 b/d of Russian diesel last year, or about 10% of its diesel consumption.

Despite fears of shipping constraints, Russia has been able to reroute these volumes, which account for more than 70% of all its diesel exports, mainly to Turkey and North Africa.

Notably, shipments to South America are also on the rise and could reach 100,000 b/d this month, according to Kpler, a ship tracker. All these barrels are indicated as destined for Brazil.

Rail Congestion

In the first three weeks of March, Russia’s diesel exports were 790,000 b/d, down a slight 20,000 b/d from January-February levels, according to official data seen by Energy Intelligence.

This result is 130,000 b/d higher than planned pipeline exports for March, with the difference essentially consisting of rail-based exports.

However, the railroad plan for March had pointed to potential exports of 240,000 b/d of diesel, and the shortfall stems from complications getting rail-based cargoes to foreign markets.

Russia currently lacks sufficient tanker cars to handle all the products, analysts say, while a surge in coal shipments has clogged up railroads. Delivering oil product cargoes to Russia's Far East is now almost impossible within the contractual one-month window, according to reports.

Regardless, Transneft operates ample capacity to handle the bulk of Russia’s diesel exports.

Two-thirds, or 400,000 b/d, of the April pipeline exports of ULSD will depart from the Baltic Sea port of Primorsk, while another 145,000 b/d will be shipped out of Novorossiysk in the Black Sea.

In March, Turkey absorbed most the diesel coming out of the Black Sea, while Libya took about 32,000 b/d, according to Kpler.

Belarus, meanwhile, is slated to export 30,000 b/d of diesel via Russia next month, down from 44,000 b/d scheduled for March. All these barrels will be shipped out of Primorsk.