European Refining: Expert call feedback: Is this time different for Russian refineries under attack?

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European Refining: Expert call feedback: Is this time different for Russian refineries under attack?

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Shortages in gasoline, but not in diesel

In a normalised environment, the expert estimates that Russian overproduction of

gasoline compared to its domestic needs at ~10% for gasoline and ~60-70% for diesel.

Hence, while the gasoline shortages are real, at the current level of production domestic

diesel demand is still being met. The expert sees a range of refinery runs of ~2.7-2.8Mb/

d as the critical level below which there could be shortages visible on the diesel side and

also at which the Russian economy would take a larger hit. The expert therefore believes

that the diesel export ban would likely be uplifted as per current deadline (31 July) or

could be prolonged for the limited time of the peak harvesting season. For gasoline the

main way that Russia is alleviating the shortages is by lowering domestic fuel standards

to use straight run gasoline and more additives. The contribution of imports is relatively

smaller in comparison, partly because terminals have not been designed to import fuel.

The expert also highlights the decrease in discretionary demand for gasoline in Russia

amid increased prices which also helps to balance the market.

Beyond refineries, upstream implications

The expert does not think that Russia reached the ceiling of its logistics exports

capabilities and hence think there could still be more crude export coming out of the

country if more refining assets are damaged. At the same time, the expert sees

implications for Russian crude production. He thinks that Russia's oil production will

likely continue to slip in the short-term and expects 3-5% p.a. decline in the medium

term.