Where Will Europe Get Its Diesel From in 22 Days’ Time?

Within three weeks, all seaborne diesel deliveries from the EU’s largest external supplier will be banned.

  • The ban on seaborne deliveries from Russia begins in early Feb.
  • Europe relies on imports from overseas to power it’s economy

Who will fill this huge supply gap? Will there be enough? Are the bloc and its members slumbering in a fuel crisis?

According to Vortexa Ltd. data, the EU imported approximately 220 million barrels of diesel-type products last year from Russia. This fuel is essential to the economy of the bloc, as it powers cars, trucks and ships as well as construction and manufacturing equipment.

In an effort to punish Moscow for its war in Ukraine, almost all imports of Russian fuel will be prohibited starting Feb. 5. It is a huge task to replace that much Russian fuel. Imagine 14,000 swimming pools of Olympic size brimming full of diesel.

There have been some positive developments. In 2021, more than half of all seaborne shipments into the EU and UK banned in effect were from Russia. This percentage had dropped to 40% by December 2013, partly due to the increase in India and Saudi Arabia.

If we look ahead, there are reasons to believe that the Russian supply can be replaced by barrels from other countries.

Eugene Lindell (head of refined products at Facts Global Energy), stated that “the lost Russian supplies” will be replaced. It’s not a sure thing.

The Suppliers

Europe has the most obvious source of diesel in the Middle East. It’s close to the Mediterranean Sea, especially, and there are new huge oil refineries that will produce millions of barrels. Abu Dhabi National Oil Co. also has already signed a deal to provide Germany.

Both the US and India, long-term EU suppliers, have increased their shipments in recent weeks. The US is expected to produce record volumes of distillates this fiscal year. This fuel category includes diesel used in automobiles and trucks.

China may be the largest potential supplier, even if it is only indirectly.

Mark Williams, Wood Mackenzie Ltd’s research director, said that “China policy will change the world.” China is the “key to all surplus refining capacities globally.”

In recent months, the number of diesel exports from China has increased dramatically. Although only a small percentage of these cargoes make it all the way to Europe in one go, they do increase regional supplies. This allows barrels to be freed up from other producers and can theoretically go to Europe.

China’s first fuel export limit for 2023 was nearly 50% higher than the previous year. This makes it unlikely that diesel shipments will drop back to the low levels of early 2022.

Williams stated that China could export 400,000 to 600,000. barrels per day of diesel-type fuel during the first half of this year. This is a comparable volume to the loss that the UK and EU currently face in terms of Russian seaborne deliveries.

He stated that there was a complete re-jigging of diesel trade flows starting in February.

But it’s important to keep in mind that China has often chosen to prioritize its environment rather than profit from fuel exports. It might do it again.

Potential Problems

There are many re-supply options available for the UK and EU, but there is also another concern: could sanctions by the EU cause Russian barrels to disappear completely from the global marketplace?

What if Russia can’t find enough non-EU buyers to buy its fuels? It could reduce production at its refineries and increase prices.

FGE projects that crude oil processing in Russian oil refineries will fall by 510,000 barrels per day over the course of February and March, compared to the previous year. Lindell explained that this is due to “deferred maintenance in the fourth quarter” and trade friction surrounding the implementation of the embargo. He also said that the consultancy expects these processing rates to recover by the summer.

Even though there are many willing buyers, it may prove difficult to get the fuel out of Russia. Many shippers are likely to be cautious about violating western sanctions. These sanctions will require that these cargoes cannot be priced above a certain level currently being discussed at the G-7.

This mechanism and the $60 per barrel price cap on crude oil have yet to be established for Russian fuels. Oil pricing agency ArgusMedia Ltd. had assessed Russian diesel at $926 per ton (about $124 a bar) and non-Russian diesel at $30 a ton (4 a bar).

If the price cap is set at a level below the market, many of the world’s tanker fleets would have to stop loading and transporting Russian cargo. This would make it difficult for them to continue accessing G-7 services such as insurance.

Demand Side

To any question about the EU’s ability to supply enough diesel, the flip side is how strong will it be?

Recent warm temperatures in Europe have no doubt helped, likely reducing heating oil consumption and helping reduce the price of natural gas. This theoretically makes it cheaper for oil refining companies to make high-quality diesel and decreases the incentive for businesses to use gas for power generation.

Benedict George, a market reporter for Argus, stated that “a macroeconomic slowdown is gradually squashing European diesel consumption.” “Country-by-country data indicates that European diesel demand has fallen at least 5% year-on-year.” Diesel demand dropped by 10% at its lowest point during the 2008 recession.

However, Goldman Sachs Group, Inc., does not anymore predict a recession in the euro-zone after the economy was more resilient at the end of last year.


Potential intermediary countries are also important in helping to mitigate the effects of the EU ban and accompanying price caps.

Turkey, for example, is not a member of the EU and could theoretically import large quantities of Russian diesel. It already takes a significant amount, and then uses it to supply its own domestic market.

It could sell the non-Russian diesel it makes in its own refineries to the EU at a higher price, if necessary.

“A prolonged economic slowdown and warm weather, continued tailwinds coming from higher Chinese exports, and a well-oiled pricing cap would help global diesel accounts remain feasible” and give Europe enough options to purchase replacement barrels,” stated Hedi Grati of S&P Global Commodity Insights, head Europe/CIS refining & Marketing.

“The more complex and possibly fractured the situation could become, the higher the demand for Russian diesel and the steeper its production decline.”

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