Global markets are facing diesel pressure due to sanctions against Russia, and Europe is at greatest risk of “systematic” shortages that could lead to fuel distribution, the world’s top trading groups say. I’m warning you.
Heads of three of the largest commodities traders, Bitre, Gunvor and Trafigura, said sanctions could result in the loss of 3 million barrels of oil and its products per day after Russia invades Ukraine. Estimated. Corporate leaders spoke at the FT Commodity Global Summit in Lausanne, Switzerland.
“Europe imports about half of its diesel from Russia and about half of its diesel from the Middle East,” said Russell Hardy, chief of Swiss-based oil trader Vitol. “There is that systematic shortage of diesel.”
These Russian imports make up about 15% of Europe’s diesel consumption, but crude oil from Russia is also processed at continental refineries.
Hardy said there was a shortage of fuel in Europe due to higher diesel consumption than gasoline. He added that refineries could increase diesel production in response to rising prices at the expense of other petroleum-derived products to boost supply, but acknowledged that distribution could be possible. ..
Torbjorn Tornqvist, co-founder and chairman of the Gunvor Group, headquartered in Geneva, said: Really so. “
Amrita Sen, chief oil analyst at Energy Aspects, said the petroleum product “Diesel is It will be much worse affected. “
French oil major TotalEnergies said it would end Russia’s diesel purchase contract “as soon as possible, by the end of 2022 at the latest,” unless instructed by the European government.
“TotalEnergies imports petroleum products from other continents, especially the share of gas oil produced at the Saudi Arabia Satorp refinery,” the company said in a statement.
Jeremy Weir, CEO of Singapore-based Trafigura, said that 2 to 2.5 million barrels of Russia’s oil production will be lost from the global market, split into crude oil and refined products. “The diesel market is very tight. It will be tough,” he added.
Tornqvist said the European gas market is no longer functioning properly as traders faced huge demands from banks for cash to cover their hedge positions.
“I think it’s broken,” he said. “I never thought anyone could say,’Oh, gas has fallen below 100 per megawatt hour.’ [and that] It ’s really cheap. ”
Europe’s largest energy traders last week provided emergency liquidity support to governments and central banks to keep gas and electricity markets functioning as sharp price volatility caused by the Ukraine crisis is straining commodity trading. Asked to provide.
Gas futures related to TTF, the wholesale gas price in Europe, plummeted to more than € 300 earlier this month from around € 80 per megawatt hour before Russia invaded Ukraine, and fell below € 100 this week as well. .. Two years ago, European gas prices were below € 20 per megawatt hour.
Twice a week newsletter
Energy is an indispensable business in the world, and the source of energy is its newsletter. Every Tuesday and Thursday, directly in your inbox, Energy Source provides important news, advanced analytics, and insider intelligence. Please sign up here.
Commodity traders are faced with a surge in margin requirements, which is a percentage of the price of securities that banks require traders to hold in cash.
Hardy said gas participation in the spot market has declined due to very high transaction costs. To move cargo equivalent to 1 MW of liquefied natural gas priced at € 97, traders would have to provide € 80 in cash, burdening capital requirements, he added.
Given the “paralyzed” state of the gas spot market, Tornqvist said European power companies will have gas next winter, unless policy makers intervene to provide guarantees to protect buyers from price fluctuations. He said he would have a hard time filling the storage.