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Russia’s eternal prohibition on exporting diesel threatens to upset a international need

September 25, 2023: Russia’s eternal prohibition on exporting diesel threatens to upset a international need.

This movement threatens to disrupt fuel supplies ahead of winter and exacerbate international shortages.

In a state law signed by Prime Minister Mikhail Mishustin, the Kremlin said it would introduce “temporary” restrictions on diesel exports to stabilize fuel prices on the domestic demand.

The ban, which came into immediate effect and applies to all countries apart from four fled Soviet conditions, does not have an end date. The countries exempt from the ban include Belarus, Kazakhstan, Armenia, and Kyrgyzstan, all Moscow-led Eurasian Economic Union members.

Russia is one of the world’s biggest diesel suppliers and a crude oil exporter. Market participants are concerned about the potential impact of Russia’s veto, particularly at a time when global diesel inventories are already at low levels. Oil prices jumped as much as $1 a barrel on the news on Thursday before settling lower for the session.

International benchmark Brent crude futures traded 0.9% higher at $94.13 a barrel afternoon in London, while U.S. West Texas Intermediate futures rose 1.1% to trade at $90.62.

Energy analysts said the vague language used in Russia’s announcement made it challenging to assess exactly how long the ban would remain in place. They alerted Moscow could again seek to weaponize fuel supplies before another winter heating season.

A spokesperson for the Kremlin said Friday that the fuel export ban would last for as long as necessary to ensure market stability, Reuters reported.

In the weeks leading up to intervention on Thursday, analysts said Russian diesel exports had come under pressure due to the ruble’s weakness, domestic refinery maintenance, and government-led efforts to increase domestic supply.

“All deals agreed before the regulation took effect are still on, meaning the likelihood of an quick halt in diesel and gasoline exports is unlikely; most probably, it would take 1-2 weeks for the impact to transpire,” Viktor Katona, lead analyst at Kpler, said in a research note published on Friday.

“By that point, nevertheless, the state might already annul this specific piece of legislation as abruptly as it was issued,” he added.

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Russia’s eternal prohibition on exporting diesel threatens to upset a international need