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Trafigura, Gunvor say Europe is headed for diesel shortage

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(Bloomberg) — Europe faces the possibility of a diesel shortage as flows from Russia dwindle following the invasion of Ukraine, top executives at two trading houses said.

Europe’s main external supplier of diesel has seen its exports of oil and petroleum products fall by between 2 million and 2.5 million barrels a day since the invasion, Trafigura Group Chief Executive Jeremy Weir told the Global Summit. Times Commodities Report on Tuesday.

“That is greatly affecting the amount of product here in Europe,” Weir said. “The diesel market is extremely tight. It’s going to get tighter and will probably lead to stockouts.”

He expects European diesel stockpiles to fall to the lowest level since 2018 this month, according to consultancy Energy Aspects Ltd. Some 500,000 tonnes of Russian diesel exports are at risk in March, the firm said in a filing, leaving “the tighter physical supply than ever.”

At the same FT event, Gunvor Group CEO Torbjorn Tornqvist said Russian refiners are cutting their oil output, threatening to exacerbate what is already a supply case in Europe’s diesel market.

“This is a global problem, but for Europe it is very difficult because Europe has a greater shortage,” he said.

Fuel supplies still flow from Russian refineries to Europe, but trade is becoming more challenging. Shipping companies, buyers and banks avoid dealing in Russian energy products in what are called “self-sanctions” after the invasion.

“That will force Russian refiners to cut production, in fact we already see it,” Tornqvist said. “What does that mean? It means that more oil will need to be exported instead of the products, and we believe that is possible and will lead to cuts in Russian production.”

Diesel prices in Europe have taken notice in recent weeks. In early March, futures advanced to a record as supply disruption fears from Russia compounded an already tight market. Heating oil prices in Germany were up more than 50% week-on-week as of March 14.

original note:

Trafigura and Gunvor say Europe is headed for a diesel shortage

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