Russia Boosts U.S. Fuel Exports Amid European Energy Crunch
(Bloomberg) -- A fleet of tankers laden with Russian diesel heading to the U.S. East Coast may help to alleviate the most expensive retail prices for the fuel in seven years.
Four tankers with 2 million barrels of Russian diesel aboard, the most in data going back to 2018, are set to arrive next week, as natural gas-rich Russia cranks up diesel-producing units that are dependent on a feedstock extracted from costly natural gas, according to Vortexa Ltd.
“Russia is better positioned to supply diesel than other refiners in Europe because of its access to cheap natural gas,” says Clay Seigle, a managing director for Vortexa in Houston. “It’s very rare we’d see volumes this large coming to the East Coast.”
The price of diesel and other fuels used for heating has soared as a winter energy crunch pinches supplies globally. In Europe, natural gas prices have more than tripled and even played a role in raising oil prices as the crises raises the prospect of power plants switching from gas to oil. Russia’s President Vladimir Putin promised additional gas flows to Europe but those volumes have so far failed to materialize as a controversial Russian pipeline is held up by permitting delays in Germany. Meanwhile, Russia is boosting exports of diesel. Flows from the Baltic port of Primorsk are set to reach the highest since at least 2016.
Diesel prices on the U.S. East Coast have jumped to the highest since 2014 with distillate inventories in the region down by about a third from levels earlier in the year. Diesel demand across the U.S. is also holding up and consumption is set to surge to the highest since 2018 next year as truckers continue to work to clear a backlog of deliveries accumulated during the pandemic.
The cargoes will arrive in New York and New Haven, Connecticut, at a time when refinery maintenance in the U.S. has tightened the supply of fuel to region. Irving Oil Ltd.’s St. John refinery in Canada, a traditional supplier of fuels to the East Coast, is restarting units after undergoing planned work since late September. The region typically gets most of its imports from Canada.
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