A European wide embargo on Russian oil may tip an already tight European diesel market into a full squeeze.  

Here is Rystad Energy’s oil refinery and oil trading note from Janiv Shah, analyst:

Potential fresh sanctions on Russia over its invasion of Ukraine in late February could prove catastrophic for European products unless imports can be secured immediately from new refineries.

Banning oil and product flows from Russia to Europe would create a seismic shock, with more than 55% of European imports of diesel and gasoil coming from Russia.

Imports of Russian crude for March 2022 exceeded the import levels for the same month in the last five years.

Total European demand for diesel and gasoil is set to top 6.7 million bpd in April 2022, up by 200,000 bpd from March 2022

A reduction in European runs for reduced finished products and a heavy decrease on Russian runs will squeeze the European diesel market further.

Europe has historically relied on Russian imports for ULSD and gasoil, produced in high amounts in Russia due to the propensity of Russian medium sour crude grades to produce these in local refineries.

The next largest source is Saudi Arabia, however before 2020 the majority of flows heading to Europe shifted to Africa.

Nigeria’s Dangote’s potential ramp up by the fourth quarter of this year could supply the direct local market with finished products, with any excess potentially exported to Europe.

European refineries output was already expected to drop in March and April due to the impact of Russian supply shortages.

The reduced local supply of finished products and import shortages is expected to keep prices at the pumps high for consumers.

Russian refinery output is also forecast to reduce, further impacting on European imports, as product supply will be kept back for domestic consumption.

The global SPR release may offer some relief, but it is too early to tell.

France and Belgium are the biggest importers of Russian products in Europe.