Russia imposes temporary halt on fuel exports to majority of nations

Russia has implemented an immediate ‘temporary’ suspension of gasoline and diesel exports to all countries except for four former Soviet states, with the goal of stabilizing its domestic market, as announced by the government on Sept. 21.

The government clarified that the export ban does not pertain to fuel shipments under inter-governmental agreements to members of the Eurasian Economic Union, a group led by Moscow that includes Belarus, Kazakhstan, Armenia, and Kyrgyzstan.

“Temporary restrictions will help saturate the fuel market, which in turn will reduce prices for consumers,” the government said in a statement.

The Russian energy ministry emphasized that this measure would prevent unauthorized "grey" fuel exports. The ban has no specified end date, and any future actions will hinge on market saturation, according to Russian First Deputy Energy Minister Pavel Sorokin.

"We expect that the market will feel the effect quickly enough. But then it will depend on the saturation of the market and the results," Sorokin said.

In recent months, Russia has grappled with gasoline and diesel shortages. Wholesale fuel prices have surged, although retail prices are regulated to align with official inflation figures. The shortage has been particularly burdensome in certain regions of Russia's southern agricultural heartland, where fuel plays a pivotal role in the harvest process.

“The removal of products comes at a time when the market is already tight, with observable distillate inventories below historical lows as we head into peak winter demand season. The ban will likely support global cracks during a period of typical seasonal weakness even if new global refining capacity starts up as signaled by operators. China could be the only country with spare capacity to ramp-up product exports, but it is unclear if it will do so,” said analysts from TD Cowen, a division of TD Securities.

The ban is constructive for refiners and supports revisions higher for fourth-quarter 2023 earnings. All refiners should benefit as a result, according to TD Cowen.

Russian seaborne diesel and gas oil exports have fallen nearly 30% to about 1.7 million tons in the first 20 days of September compared with the same period in August, according to traders and the London Stock Exchange Group plc (LSEG) data.