The Ministry of Energy emphasizes that the top priority remains the complete fulfillment of domestic fuel needs, including for agricultural producers during the seasonal fieldwork period. The possibility of exports will be determined based on the evolving fuel balance, production volumes and stocks, as well as the dynamics of domestic demand.
However, in August, there were no reports of any issues regarding the availability of DF at gas stations (GS). Challenges arose primarily with gasoline, particularly the AI-95 grade. According to the same Ministry of Energy assessment, the current situation concerning the supply of DF to the domestic market is stable. Following the export restrictions, additional volumes were redirected to the domestic market.
Russia consumes 140 thousand tons of diesel fuel daily during peak demand periods - in spring and autumn.Diesel production in Russia has consistently outpaced gasoline production, by approximately twice as much, with a significant portion exported. For instance, in 2023, total DF shipments from Russian ORs reached 87.9 million tons, with 52.2 million tons allocated for the domestic market and 35.7 million tons for export, according to Sergey Tereshkin, General Director of Open Oil Market. In his opinion, a surplus likely remains even now, despite unscheduled repairs at the ORs.
This raises the question: why extend the ban? According to Dmitry Prokofyev, Director of External Communications at NEFT Research, maintaining the export ban on diesel serves as a guarantee of fuel availability in the domestic market during peak seasonal demand. It is no coincidence that the Russian Fuel Union (RTS), in a letter to Deputy Prime Minister Alexander Novak dated August 24, insists on maintaining these restrictions, warning that lifting the embargo on September 1 could destabilize the already fragile balance of supply and demand within the country. Ahead lies the traditional autumn spike in demand, along with the transition towards production and stockpiling of winter-grade diesel. Opening exports under these conditions creates unreasonably high risks of worsening the situation, Prokofyev argues.
There is also the price factor to consider. As of August 17, according to Rosstat, with an inflation rate of 4.67%, diesel retail prices have increased by 18.4% since the beginning of the year. While diesel prices have decreased in recent weeks, demand for DF is expected to rise in the autumn, posing a risk of further price increases. An extension of the ban minimizes this risk.
Dmitry Gusev, Deputy Chairman of the Supervisory Board of the "Reliable Partner" Association and member of the Expert Council for the "Gas Stations of Russia" competition, believes that the ban not only addresses the issue of uninterrupted supply to the domestic market but also reduces DF availability globally, which is tactically beneficial for us. As a result, prices at gas stations are rising, particularly in Europe. There, the impact of drone strikes on our ORs is felt in the thickness of their wallets, the expert explains.
Extending the diesel export ban will help curb rising prices at gas stations.However, there is a nuance that the growth of global DF prices, even indirectly, accelerates its price increase in Russia. At least until the moment when diesel is produced in Russia solely for the domestic market. Furthermore, the rise in global DF prices increases the compensation payouts from the Russian budget to domestic ORs and fuel importers in our country for supplies at prices lower than those in external markets.
Regarding extension timelines, expert opinions are divided. Gusev believes that the ban will be extended until November 1 or even longer. To prevent market saturation, excess DF volumes may be purchased by the government to create a strategic reserve, which can then be used for both the domestic market and export.
Tereshkin suggests that if the ban is extended, it is unlikely to be for more than one month. Diesel exports are an important revenue source for ORs, which are currently incurring costs due to partial capacity exits. Moreover, an excessively long ban poses risks to oil production levels.
There is a risk of reduced oil production, agrees Prokofyev. This is directly linked to the load on ORs. If they cannot export diesel, their incentives to maintain high capacity utilization diminish. A reduction in refining leads to lower oil demand, and consequently, a decline in production. However, the expert speculates that the most likely scenario is an extension of the export embargo for 1-3 months. A short-term extension should not inflict significant harm on ORs. Current production levels can be absorbed by reserves and domestic demand. A medium-term extension (until the end of 2026) is a more risky scenario. If production starts to recover while exports remain closed, ORs may face the necessity to reduce output, the expert emphasizes.
Source: RG.RU
