Russia’s Refiners to Flood Europe with Transport Fuels

In 2018, Russian refiners will increase production of transport fuels by 110,000 b/d, according to ESAI Energy's recently published CIS Watch One-Year Outlook. This marks the first significant increase in Russian supplies of transport fuels in several years, and will allow Russian refiners to expand their share of Europe's middle distillate market. Larger volumes of Russian middle distillate in Europe will come at the expense of refiners in the U.S. and the Middle East, who also count on exports to Europe.

The CIS Watch describes key refining investments in Russia and their impact on product markets in 2018. This year, Russian refiners produced 2.7 million b/d of gasoline, diesel, and jet fuel – the same as they produced three years ago. Next year, the launch of Taneco's 140,000 b/d crude distillation unit and TAIF's 70,000 b/d hydrocracker will spearhead a 110,000 b/d jump in refinery output of transport fuels. As the report describes, the projects will result in higher gasoline, diesel, and jet fuel production, but little to no additional fuel oil.

“For the past couple of years, deteriorating refining margins resulted in a bumpy ride for refiners, which restrained product output,” explains Andrew Reed at ESAI Energy. “That will all change in 2018. More than half of the 110,000 b/d of new supply will be exported. The main consequence is that Russia will carve out a bigger share of Europe's middle distillate market. That's bad news for diesel-exporting refineries in the U.S. and Middle East who count on deliveries to Europe.”

About ESAI Energy LLC:  Energy Security Analysis, Inc. (ESAI), founded in 1984, is a global energy consulting company that provides market research and strategic advisory services. ESAI Energy LLC provides outlooks ranging from 1-week to 25-years and a proprietary framework for interpreting and prioritizing empirical market data and industry information. ESAI Energy's detailed analysis of energy markets identify and explain future market trends and opportunities for energy and energy dependent companies. 

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