Turkey and Morocco are good starting points for clues to the future landscape of the diesel market if the European Union bans fuel imports from Russia.
Turkey imported 213,000 barrels a day of Russian diesel in December 2022, the highest since at least early 2016, according to Vortexa Ltd data compiled by Bloomberg. January inflows are expected to be the second-highest on record. Moroccan revenue has also risen sharply.
On February 5, the 27-nation EU will all but halt fuel purchases from Russia, extending a ban that began on December 5, 2022 for crude oil. That worries dealers because Russia is still sending the lion’s share of its diesel to Europe, while the continent is standing still, sourcing most of its external supply from Russia.
But the increased flows to Turkey and Morocco offer a glimpse of one way the diesel market will sidestep the ban.
Turkey, for its part, is now exporting more diesel to Europe, while Morocco appears to have scaled back its purchases from Spain – both developments that will help keep EU supplies going. Saudi Arabia also delivers less to the North African country.
There is nothing illegal in either business and it will not exist even after the EU import ban. However, the bloc will join the G-7 to cap fuel prices for anyone wanting to use European tankers or industry-standard insurance to deliver cargo to other markets.
To be clear, current flows to Morocco and Turkey are insufficient to replace the huge lost demand that Russia will have to replace if Europe stops importing.
The EU will still get more than a quarter of its diesel imports – around 612,000 barrels a day – from Russia even in January, while the bloc will still account for around 41% of Russia’s export market in January.
But they offer two examples of some of the deals that will help keep Russian fuel on the market – a key goal for EU officials and the US Treasury alike.
