Fears mount over thin Russian diesel exports from Baltic in March

Quantum Commodity Intelligence - Refining margins for diesel in Europe saw one of the biggest one-day jumps in recent history on Tuesday to hit a post-pandemic high, on fears of thinning supply of diesel from the Russian Baltic port of Primorsk to northwest Europe.

Low sulfur gasoil futures minus Brent futures measured in dollars per barrel - also known as the crack - jumped $2/b overnight to push past $20/b by 1630 Singapore time on Tuesday on fears that supply this month will be sharply lower from the largest supplying port to Europe.

An initial month-long program of loadings has been recalled because of the Russian invasion of Ukraine, one source said, and the first nine days of loadings, seen by Quantum, show a low daily rate of exports.

Eleven cargoes are listed in March (see list below), loading 390,000 mt over the first nine days, or a daily rate of 43,333 mt, down 25% on the 56,428 mt average in the scheduled program for February.

That would equate to 1.34 million mt over the 31 days of March, although one source said expectations for the month were still 1.7 million mt.

"I have seen an initial program but I think it was recalled because of the issues (with the Russian war) currently, and I don't want to give out incorrect information," one trader told Quantum.

ARA Barges

Flat prices for distillate barges loading in ARA, which trade as a differential to futures, jumped to $887.25/mt Monday by 1630 London time, the second highest of the year following the seven-year peak seen on February 24.

This month's Primorsk loading program picture has been further complicated by the UK saying it will ban Russian vessels from its ports.

In 2020, the UK imported 3.6 million mt of diesel from Russia, making the country by far its biggest single source of imports, according to analysts.

Concerns may also mount over payments after the US, the UK, the EU and Canada blocked a number of Russian banks from Swift, the international bank payment system.

Russia is heavily reliant of the Swift system for its oil and gas exports.

A low Russian diesel export program will exacerbate an already tight European distillate market after a disappointing volume arrived into the region last month.  

Europe's reliance upon seaborne diesel imports peaks seasonally at around February-March to around 30%, according to Vortexa.

"If this level of supply was disrupted, or even faced with a higher risk of disruption, prices would surely climb," analysts at the ship tracking company warned.

Vortexa pegged February arrivals into Europe from Asia, largely India, and the Middle East at around 350,000 bpd, below the 10-month low seen in January.

There has also been little flow from the US, with February imports pegged at 50,000 bpd.

Primorsk diesel loading program first nine days of March

SEASPRAT - 33000 mt GAZPROMNEFT  loading 01-02/03/22

ATLANTICA BELL - 33000 mt GUNVOR (SURGUTNEFTEGAZ) loading 02-03/03/22

STI WEMBLEY/STI CAMDEN - 33000 mt ROSNEFT loading 03-04/03/22

HAFNIA SUNDA - 33000 mt GUNVOR (SURGUTNEFTEGAZ) loading 04-05/03/22

STI CAMDEN - 33000 mt  TAIF-NK loading 05-06/03/22

SEYCHELLES PIONEER/NS POINT - 33000 mtLITASCO (LUKOIL) loading 05-06/03/22

BALTIC MARINER I/LUGANO – 33000 mt ROSNEFT loading 05-06/03/22

CB CARIBIC – 33000 mt GUNVOR (SURGUTNEFTEGAZ) loading 06-07/03/22

STI CAMDEN 33000 mt - TAIF-NK loading 07/08/03/22

STI PIMLICO 33000 mt - VITOL (TATNEFT) loading 07-08/03/22

HAFNIA ARCTIC  60000 mt - TRAFIGURA (ROSNEFT) loading 08-09/03/22