European Energy Market Faces Reality of Looming Restrictions
The European market may not be prepared for the imposition by the EU, the G-7 and its allies of the Russian fuel price cap, which is due to take effect Feb. 5, and the simultaneous prohibition from the EU on nearly all Russian oil imports. While current restrictions apply to Russia's crude oil shipments, the upcoming cap and ban on refined fuels, diesel in particular, has market experts worried about a price spike, Bloomberg reported. The EU will need to replace around 600,000 barrels a day of diesel imports, while Russia will scramble to get new buyers, find storage or cut refinery production.
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Bloomberg also noted that India has become one of the biggest purchasers of Russian oil since the start of the war in Ukraine. A jump in Indian diesel flows would essentially guarantee that Russian crude oil was being bought, refined into diesel in India, then sold back to Europe, the report said.
The restrictions could also generate "murkier practices, such as redocumenting cargoes, or sending fuels to refined products storage hubs in other regions" to be blended with non-Russian goods, the report said. Russia could turn to buyers in Africa, Latin America and Asia, while Europe will seek out refiners in the Middle East, where new refinery operations are ramping up, the report said.