Saudi Arabia’s imports of Russian diesel reached a record level in May (2023), benefiting from the discounts offered by Moscow, after the European Union banned Russian exports of seaborne oil products on February 5 of this year, as part of a series of Sanctions in response to the war in Ukraine, which aim to reduce Moscow’s revenues with which it supports the war.
This jump in imports allowed the kingdom’s exports to Singapore to increase this May to record levels, and to benefit from better net profits in the east than Europe, driven by a contraction in Asian supply during the maintenance season, according to a report seen by the specialized energy platform, from Reuters.
However, it is unclear whether Saudi Arabia is hoarding some of its own production and shipping Russian supplies mostly via exchanges instead, since both have typical diesel specifications.
Kepler data showed that Saudi diesel exports worldwide in April recorded their highest level ever, at about 3.7 million tons (27 million barrels).
Saudi imports of Russian diesel in May
Saudi Arabia imported 500,000 tons (3.7 million barrels) or more of Russian diesel in May; Most of them will reach Ras Tanura, where one of the Aramco state refineries is located, according to what Reuters quoted from two commercial sources, Kepler and Refinitiv.
Meanwhile, volumes of diesel coming from the kingdom to Singapore are set to reach around 400,000 tonnes (2.92 million barrels), an unprecedented level, according to data from Refinitiv, Vortexa and industry exporters.
“Singapore’s diesel supply is relatively tight due to regional refinery maintenance, while Middle East supply is on the rise, which could create immediate balancing opportunities for traders to move cargoes to Singapore,” said Serena Huang, Head of Asia Pacific Analysis at Vortexa. .
Increased Saudi supplies could feed Singapore stocks, as exports from Northeast Asia decline during the May-July refinery repair season.
It is noteworthy that global supplies of diesel have increased since the beginning of 2023, with increased exports from China and the Middle East, and a mild winter in Europe has limited demand, which has helped lower prices.
The following graph – prepared by the specialized energy platform – shows diesel exports from the Middle East to Europe, in the period from January to September 2022:
Attractive discounts for Russian diesel
Cargoes of Russian red diesel, which contain sulfur at 10 parts per million, trade at discounts of around $30 per barrel to Middle East prices on a FOB basis, against spot premiums in Asia of the same degree at 16 cents per barrel to Singapore prices. According to trade sources and Refinitiv data.
FGE analyst Lu Yawen said more shipments of red diesel in the Middle East are heading east rather than west to Europe, as rising inventories and weak economic growth have pushed prices lower.
The cost of chartering a long-haul vessel on the Middle East route to Singapore has also fallen to just under $25 a ton from about $34 a ton in the past two months, half the cost of the same vessel for travel to Europe.
The data showed that spot premiums for red diesel and refining margins in Asia fell by more than $8 and $1.50 a barrel, respectively, in the past two months, according to Reuters news agency quoted a Refinitiv Eikon.
Saudi Arabia is the largest exporter of diesel in April
Saudi Arabia’s imports of Russian diesel amounted to about 174,000 barrels per day in April 2023, and have exceeded this level so far this May, according to data collected by Bloomberg from Kepler.
At the same time, Saudi Arabia has become Europe’s largest supplier, overtaking Russia since February, according to data seen by the specialized energy platform.
Saudi Arabia overtook the United States to become the world’s second largest exporter of diesel and red diesel last month, with nearly 35% of the country’s total exports in April shipped to the European Union and the United Kingdom, according to Kpler data.
The bulk of these shipments came from the ports of Jubail and Yanbu in Saudi Arabia; Some supplies also went to Africa, and in turn, barrels of Russian origin arrived at the ports of Ras Tanura and Jizan in the Kingdom.
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