Before the Ukraine War, the EU depended on Russia for diesel as well as natural gas. It banned seaborne imports of Russian diesel on February 5. That prompted predictions of a supply crunch. Instead, diesel prices and refining margins have dropped. That is counter-intuitive.
Europe does not make enough of its own diesel. The continent has a structural shortage of some 1.4mn barrels daily, against production of about 5mn. Russian diesel once filled half that gap. Any disruption to supplies should lift local diesel prices and shares in European refiners. These include biodiesel specialist Neste Oil of Finland and Spain’s Repsol. No rally has materialised.
Tanker journeys have lengthened, however. Russian oil companies are sending more supplies to Latin America and Africa. Europe has replaced Russia’s imports with diesel from Asia and the Middle East. The Baltic clean tanker index has jumped 68 per cent since the February ban came into force.