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How EU will manage fuel in light of the Russian trade interdiction

Jan 16, 2023

By: BlinkX Research Team

EU and the UK have already enforced the prohibition of Russian crude oil while the ban on diesel and petroleum will kick in from February 05 2023. That is a full 23 days away. For the EU, it creates a huge supply gap, considering the EU and the UK imported half of their seaborne shipments from Russia in 2021. One major concern is to find alternative exporters of oil to bridge the gap. 

The most viable option for the EU is the Middle East with its convenient trade route via the Suez Canal. ADNOC has already struck a deal to supply Germany with fuel. Even the US and India are expected to produce record volumes of distillates for trucks and automobiles in the EU region. A nation whose policies could be a gamechanger for the market would be China, whose outward shipments have increased in recent times. In the recent past, China chose to prioritize environmental benefits over fuel exports.

The switching of demand from Russia to other nations looks feasible on paper. However, there could be the disruptive impact of the supply gap if Russian barrels vanishing completely from the market. If Russia is unable to find any suitable non-EU buyer, production would inevitably be cut down, which in turn could tighten world supplies and push up the crude price per barrel.

However, one view is that things may still go by smoothly since EU demand for oil and gas has been slackening. The EU demand may actually be lower. In effect, the cessation of supplies from Russia to the EU may not have a real impact. In the process, Russia could end up losing its market.