New sanctions over Russia’s invasion of Ukraine could be “catastrophic” for European products unless imports can be found from new refineries, an expert said Wednesday.
Banning oil and product flows from Russia to Europe would create a seismic shock, with more than 55% of European imports of diesel and gasoil coming from Russia,” Rystad Energy’s Janiv Shah said in an oil refinery and oil trading note.
“Potential fresh sanctions on Russia over its invasion of Ukraine in late February could prove catastrophic for European products unless imports can be secured immediately from new refineries,” he said.
“Imports of Russian crude for March 2022 exceeded the import levels for the same month in the last five years. Total European demand for diesel and gasoil is set to top 6.7 million bpd in April 2022, up by 200,000 bpd from March 2022,” Shah added.
“A reduction in European runs for reduced finished products and a heavy decrease on Russian runs will squeeze the European diesel market further. Europe has historically relied on Russian imports for ULSD and gasoil, produced in high amounts in Russia due to the propensity of Russian medium sour crude grades to produce these in local refineries,” he continued.
The next largest source for more supply would be Saudi Arabia, but in 2020 much of this supply shifted from Europe to Africa.
The reduced supply with have a deleterious effect on European consumers, keeping prices high at the pumps for consumers. In Europe, France and Belgium are the biggest importers of Russian products, Shah noted.
