Diesel bulls are leaning back into the market as fresh strikes on Russian refining tighten the near-term balance and spur a rush into distillate hedges. According to Bloomberg, funds now hold their strongest net-long in European diesel since early 2022, and diesel options activity on ICE has set monthly records, while front-month low-sulphur gasoil trades in the low $700s per metric ton.
These moves follow renewed disruption at Gazprom’s Salavat petrochemical complex in Bashkortostan, its second hit in a week, adding to a rolling loss of Russian refining capacity.
The supply picture has deteriorated across several Russian hubs since August amid repeated Ukrainian drone strikes. Markets are responding by marking down export availability of diesel and other middle distillates. European paper barrels have responded accordingly, reflecting tighter prompt supply heading into autumn refinery maintenance, according to the Financial Times.
Offsetting supply is coming to the market, though. India’s refiners have lifted product exports to multi-year highs, including gasoil, feeding Europe and the Mediterranean and partially cushioning the loss of Russian volumes. But the scale and timing of these barrels remain unsteady due to disruptions in Russia’s internal logistics and refinery runs.
At the same time, Moscow is weighing an extension of its gasoline export ban into October amid domestic tightness, with officials signaling that broader fuel-export restrictions remain on the table “if needed”. Any additional curbs, or operational adjustments by refiners reacting to them, would reverberate through regional product balances and freight, especially for ARA-linked diesel benchmarks.
U.S. distillate inventories fell by 1.7 million barrels in the week to September 19, leaving stocks about 8% below the five-year average; total commercial petroleum inventories eased by 0.5 million barrels as refineries ran at 93% of capacity.
By Tom Kool for Oilprice.com
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