Recently, U.S. President Biden announced a new round of sanctions on Russia, targeting two major Russian oil companies and 183 oil tankers. This is one of the toughest sanctions on Russia's energy sector since the Russia-Ukraine conflict began. The move has caused a surge in global diesel prices, particularly in the European market, where the tension in diesel supply has become increasingly prominent.
According to Reuters, as a result of the sanctions, a portion of Russia's diesel exports are at great risk, with daily exports expected to decrease by 150,000 barrels. The sanctions have caused global diesel prices to rise, especially in Europe, where the diesel benchmark contract premium reached its highest point in the past 10 months on the 17th, with a premium of $50.25 per ton. The international market is already experiencing a so-called "backwardation" phenomenon, where prices for near-term delivery diesel contracts exceed those for future contracts, reflecting the tight supply situation.
Domestic diesel futures prices in the United States have also shown a significant increase, with a rise of over 5% on the 10th, marking the largest single-day increase since October last year. On the 16th, diesel prices again broke a six-month high, reaching $111 per barrel. The cold weather in the northern hemisphere has further driven market demand.
The Asian market has not been spared either. Dubai's spot diesel price rose by 8.5% last Friday, and Singapore's diesel swap prices increased by 5.5%. Although some traders have stated that the reduction in Russian diesel imports has less impact on the Asian market, with the rising global demand for diesel, the supply from other countries has also gradually tightened.
In 2022, before Western countries imposed oil sanctions on Russia, Europe was the largest buyer of Russian diesel. However, as sanctions intensified, Europe has gradually turned to India, the Middle East, and the US for diesel purchases. Although these sanctions mainly target oil transportation, analysts worry that it could indirectly affect Russian crude oil exports, further impacting diesel supply in the European market.
Additionally, Turkey and Brazil, two of the main buyers of Russian diesel, are currently seeking alternative sources of imports, which might lead to increased competition in the European market. However, some analysts believe that although Russian oil tankers are sanctioned, importing countries can continue to use unsanctioned tankers to import Russian oil, so the overall change in Russian diesel exports might not be too drastic.
According to data from the International Energy Agency, Russia reduced its daily export of crude and refined oil by 350,000 barrels last year, but its total export value still grew by 2% year-on-year, reaching $192 billion. This phenomenon reflects that Russia still maintains a certain export capacity in the global market.
Meanwhile, the market is closely watching potential new policies from the Trump administration after the inauguration. Trump's nominee for Treasury Secretary, Benson, has stated that if elected, he would impose even stricter sanctions on Russia, further increasing market uncertainty.
This round of sanctions and the subsequent rise in diesel prices will have a profound impact on the global economy. Especially against the backdrop of continuously rising energy demand, regions such as Europe and Asia may face greater supply pressure.
