Diesel Prices Rise Globally After New U.S. Sanctions on Russian Oil

Diesel prices around the world have gone up after the U.S. introduced stricter sanctions on Russia’s oil trade. These measures, announced on January 10, are designed to reduce Russia’s oil revenue, which the country uses to fund its war in Ukraine.

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Why Are Diesel Prices Increasing?

The new sanctions focus on Russian oil producers and tankers, especially those used to transport oil to countries like India and China. These nations have been buying discounted Russian oil, which Europe stopped importing after Russia invaded Ukraine. With the sanctions in place, analysts expect fewer Russian diesel exports, which is driving up prices globally.

Natalia Losada, an analyst at Energy Aspects, explained, “Diesel profit margins are up, and we expect significant disruptions to Russian diesel exports.” She estimated that about 150,000 barrels per day of Russian diesel shipments could be affected.

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The Impact on Diesel Markets

• Europe: Diesel prices in Europe hit their highest levels in 10 months. Refining margins, which measure the profitability of turning crude oil into diesel, reached $20 per barrel—another record high for the past five and a half months.

• Asia: Diesel refining margins in Asia rose 8% earlier this week, reaching over $17 per barrel before settling slightly lower.

• United States: U.S. diesel futures saw a significant jump of over 5% in one day, hitting a six-month high of $111 per barrel.

How Sanctions Affect Diesel Supply

Before the sanctions, Europe was the largest buyer of Russian diesel. Now, it relies on imports from countries like India, the Middle East, and the U.S. However, there are concerns that the new restrictions could impact Indian and Chinese refineries, potentially reducing their diesel exports to Europe.

Turkey and Brazil, Russia's main diesel buyers, may also need to find new suppliers, increasing competition in global markets.

Can the Market Adapt?

Some experts believe the global diesel market will adjust to the new challenges. Analyst Eugene Lindell from FGE Energy said, “We don’t expect major changes in Russian product flows. The same volumes can likely move to the same destinations using non-sanctioned tankers.”

Impact of US Sanctions on Diesel Supply and Prices"

• Rising Diesel Prices: Diesel prices are expected to rise globally as US sanctions on Russia target its diesel exports, tightening supply.

• Supply Chain Disruptions: While Europe has found alternative diesel sources, it may take time to adjust, leading to continued price hikes.

• Global Ripple Effect: The sanctions not only impact Europe but could also affect markets in Asia, Turkey, and Brazil, causing potential supply shortages and increased competition for diesel supplies.

Also Read: Oil Shipping Rates Increase Due to U.S. Sanctions on Russian Oil