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Diesel fuel – embargo on fuels from Russia. When will she come in? what consequences?

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In the first days of February, the ban on importing fuel from Russia will come into force. – The embargo on Russian diesel will be important for us, as we met a large part of our demand with imports from this country. We can feel some effect in fuel prices, said Urszula Cieślak, BM Reflex analyst in an interview with TVN24 Biznes. PKN Orlen assures that “it has been implementing the restrictions for a long time, which will formally enter into force on February 5”.

– Today, everyone still fills their available capacity with diesel from Russia, i.e. if you can still buy diesel from Russia, we buy it. After February 5, you will have to buy it from other directions, Cieślak pointed out.

What about diesel after the embargo on Russia?

An analyst from the Reflex Brokerage House said that “the embargo on Russian diesel will be important for us, because we satisfied a large part of the demand with imports from Russia, so some effect in fuel prices we can feel it.” However, she says it is “difficult to predict what the increase might be.”

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We’ll see what the market looks like. China are slowly unlocking – will this situation continue and what will the demand for ready fuels look like? Of course, Russian diesel will have to be replaced with a product from other directions, but this is not a surprising decision, so I think there was enough time to prepare, she said.

She added: “We don’t know what’s going to happen. The oil embargo came in and the price did not increase. Until we do not feel the lack of diesel, the situation should be calm. In addition, the zloty is strong and if it strengthens, it will be beneficial.

– I would not like to say at this point that diesel will cost PLN 10 per liter. For this to happen, the wholesale price at the refinery would have to increase by about 30 percent. At present, it seems unlikely to me.

Turmoil “cannot be ruled out”

Robert Brzozowski, Vice-President for Commercial Affairs of Unimot – the largest independent importer of fuels in Poland, as well as the operator of a network of over 100 fuel stations under the AVIA brand – stated that the company does not expect major turmoil on the market, but “they cannot be completely ruled out either.”

He assessed that diesel fuel is available, e.g. in the Middle East, the United States or China, which have limited internal demand due to the pandemic situation. However, it takes longer to deliver it to Poland, and it is more expensive.

– The challenge will be the extended logistic chain – a ship from Primorsk sails to Gdynia in 2 days, from the Red Sea region – 30 days, and from India about 40 days. Due to the distance, the product is also delivered by larger ships that cannot call directly at the ports of Gdynia and Świnoujście due to the too small depth – said Brzozowski.

As he explained, Polish ports are adapted to handle tankers with a capacity of about 35,000 tons. tons and such ships sailed directly from the port of Primorsk. Meanwhile, diesel oil from further directions is transported in large tankers with a capacity of about 100,000 m3. tonnes, so it must be reloaded onto smaller tankers in ARA ports or in the Danish straits to reach ports in the Baltic Sea.

The vice-president of Unimot assessed that in the near future the prices of imported diesel will certainly increase due to higher logistics costs.

– However, it cannot be directly stated that this will translate into an increase in fuel prices for retail customers, because the price of fuels at stations is affected by many variables, and the cost of bringing them to Poland is only one of them – noted Brzozowski.

“We do not import diesel from Russia”

– There will be some turmoil on the market, but the situation should stabilize. Both in Europe and in the world, there are possibilities to adapt to the EU embargo on ready fuels, including diesel, PKN Orlen chief economist Adam B. Czyżewski said in an interview with PAP.

The company itself, in a response sent to TVN24 Biznes, noted that “from the beginning war in Ukraine does not import diesel from Russia, balancing the Polish market with purchases from alternative directions.

“So the concern has been implementing restrictions for a long time, which will formally enter into force on February 5, 2023. This practice, in addition to obvious reasons, was intended to prepare PKN Orlen to purchase fuels from any direction in the world, which was successful,” the company said.

He added that “additional problems with the availability of fuels for PKN Orlen customers should not be expected”, which “means that there will be no shortage of fuel for both wholesale customers and customers buying fuel at stations”.

We also ensure that the company analyzes the environment, which is subject to large fluctuations, on an ongoing basis and takes all measures to maintain a stable price level for its customers.

Import of diesel oil to Poland

According to the data of the Polish Organization of Oil Industry and Trade, the demand for diesel oil in Poland after three quarters of 2022 was 2 percent higher than in the previous three quarters. higher than after 3 quarters of 2021″, and fuel market deliveries amounted to 16.7 million m3 (they were 400,000 m3 higher yoy). As for imports, POPiHN reported that a total of 5.1 million m3 were imported to the country diesel oil, which accounts for 33% of domestic consumption.

“In previous years, Russia was the largest supplier of diesel to our market, but the war changed the situation. According to the data of the Energy Market Agency, in the first three quarters of 2022 Russia was responsible for 34% of diesel imports to Poland, compared to 65% a year ago. In other words, between January and September 2022, 1.26 million tonnes of diesel oil arrived in Poland from Russia, compared to 2.68 million a year ago.

In the POPiHN report “Oil Industry and Trade”, which summarizes 2021 (the report for 2022 has not yet been published), we can read that in 2021 the consumption of diesel oil amounted to almost 22 million m3, with almost 7 million m3 of imported fuel ( about 32 percent).

“Diesel oil was traditionally purchased in more countries than petrol. Russia, Germany, Slovakia and Belarus remained the main suppliers. This fuel was also purchased in significant quantities in Lithuania and the Czech Republic. After the introduction of economic sanctions, purchases in Belarus fell significantly. 70% of the product was imported from the territory of non-EU countries (2 percentage points more than in the previous year), according to the POPiHN report.

Diesel oil import directionsPOPiHN

In turn, the Wysokienapiecie.pl portal pointed out at the end of last year that “in the whole of 2022, we will spend about PLN 110 billion on imports of fuels, mainly for cars, of which PLN 73 billion for the purchase of crude oil, PLN 30 billion for the purchase of diesel oil PLN 5 billion for the purchase of petrol and PLN 3 billion for the purchase of LPG.

Diesel fuel from Kuwait

On January 9, the Bloomberg agency reported that Kuwait may partially help Europe overcome the effects of the embargo on imports of petroleum products from Russia, which will come into force at the beginning of February. The country intends to export five times as much diesel and twice as much aviation fuel to the Old Continent this year than in 2022.

The volume of diesel oil deliveries from Kuwait is expected to increase to 2.5 million tons per year and about 50,000. barrels per day, while the volume of aviation fuel exports is expected to double – the volume of annual sales to Europe is expected to be at the level of 5 million tons, Bloomberg reported, citing its own sources close to the Kuwaiti authorities.

At the end of last year, EU countries bought almost 1.3 million barrels of oil products from Russia daily, of which about half was diesel oil. After February 5, when the EU ban on imports from Russia comes into force, diesel prices on the continent may increase significantly, the American agency forecasts, citing the estimates of fuel market analysts.

Kuwait is not the only Middle Eastern country that intends to increase exports of petroleum products to Europe in 2023. The authorities of Saudi Arabia and the United Arab Emirates have similar plans, Bloomberg reminded.

Author:Krzysztof Krzykowski

Main photo source: PAP/Jakub Kaczmarczyk

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