The International Energy Agency (IEA) warns that the diesel deficit in the world market is in danger of worsening next year with the entry into force of the European Union’s embargo on Russian oil, which will increase the tension over this fuel in the markets.
In the monthly report on the oil market published this Wednesday, the IEA explains that the EU has so far kept imports of diesel from Russia at 600,000 barrels per day, but with the European embargo since the end of 2022 these volumes will have to be replaced by diesel from other countries.
There are currently three major refinery projects to produce diesel in Kuwait, Nigeria and Mexico that are expected to come online by the end of 2023 and could help boost demand.
But if Russia fails to divert the diesel production it currently sells to Europe to other buyers outside the pricing mechanism it intends to impose, the agency fears European, Latin American and African importers will compete for lower flows.
This year, the diesel market is already under stress, not least because diesel demand has been strong and, at the same time, China’s export quotas have reduced its foreign sales.
Added to this are the taxes recently imposed by India, which reduced the production of diesel in this country, which is the main supplier of diesel in Asia.
In addition to the particular situation of diesel, the IEA on Wednesday revised its forecasts for world oil demand for this year slightly downwards, specifically less than 110,000 barrels per day less than a month ago.
IEA experts estimate that in The average consumption of 2022 will be 100.1 million barrels per day4.8 million more than last year. In 2023, the increase will be 1.7 million barrels per day to 101.8 million barrels per day.
The downward correction of the estimates for this year is explained by the economic slowdown in the OECD countries and the effect of the activity restrictions in China to try to control the resurgence of Covid-19.
This is partially offset by the increased use of oil for energy production in Europe and the Middle East, where gas is being partially replaced because the price has risen.
The oil market’s downward outlook has already had an effect on the price of crude, which in the three months to early September has fallen 65% from its June peak.
The IEA notes that Russia’s oil exports increased in August by 220,000 barrels per day to 7.6 million barrels per day, which means they are only 390,000 barrels below pre-Ukraine invasion levels.
Although Russian exports to the EU, US, Japan and South Korea, the countries that are imposing sanctions against Moscow, are falling by two million barrels a day, the Kremlin has managed to redirect most of these shipments to India, China and Turkey.
The agency, which groups essentially the developed countries that are sanctioning Russia, estimates that Russian production will fall from almost 11 million barrels a day in August to 10.2 million in December, when the European embargo takes full effect.
In February, the decrease is expected to be 9.5 million barrels per day, which represents a decrease of 1.9 million barrels compared to the previous year, when there were still no retaliatory measures against Moscow for the war in Ukraine.
Source: Observadora
