BAKU, Azerbaijan, March 15
By Leman Zeynalova – Trend:
For European refineries which rely heavily on Russian Urals for their diet, the search for alternatives grades has already started, but given the tightness of the market, this is a challenging task and refineries are being forced to rely on local or regional crudes and could cut runs, disrupting the supply of products such as diesel gasoline, Trend reports with reference to Oxford Institute of Energy Studies (OIES).
OIES notes that distillates markets are already under severe pressure.
“Any relief for European distillates from Russia is unlikely as self-sanctioning extends to products and as Russian refineries themselves could cut runs as buyers are reluctant to purchase Russian products. The very high prices in Europe are opening the arbitrage from Asia, although distillates markets in Asia are also tight due to increased demand as economies re-open,” the Oxford Institute said in its report.
OIES believes that the impact on products markets extends beyond distillates and the US ban on Russian supplies will also impact US refineries which rely on Russian crude and unfinished products such as VGO and fuel oil as key ingredients to US refineries’ diet. Gasoline and distillate stocks in the US have already been falling and wholesale gasoline and diesel prices are at a record high.
“The most plausible scenario for 2022 is for the market to remain in deficit, as previously expected surpluses are now nearly eliminated. Our best-case scenario now sees supply/demand conditions only balanced in 2022, with the risk of deficits building in an already tight stocks environment across all quarters. The supply/demand gap in 2022 ranges between -1.9 mb/d and 0.5 mb/d, with the prospect of a more balanced market reappearing again towards the end of 2022 and in 2023,” says the report.
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