Russia to extend diesel export ban, use quotas to fulfil US deal, sources say

Russia Extends Diesel Export Ban Through Year-End, Implements Quotas

Russia's Diesel Export Ban Extension and Quota System

Background and Recent Developments

Oct 29 (Reuters) - Russia will extend its diesel export ban until the end of the year while allowing some companies to ship fuel under a quota system to meet its new export commitment to the US, two people familiar with the discussions told Reuters.

Moscow and Washington agreed a diesel supply deal after Presidents Vladimir Putin and Donald Trump spoke by phone earlier this month. The energy ceasefire between Russia and Ukraine announced alongside the agreement has allowed Moscow to increase fuel production. At the same time, fuel shortages earlier this year have prompted the government to maintain tight controls on oil product exports. 

Current Export Activity

Deputy Prime Minister Alexander Novak said on Tuesday that three tankers carrying Russian diesel to export markets were already under way and that a fourth would sail on October 28.

Refinery Recovery and Utilisation

Novak also said Russian refineries were recovering quickly from repairs. The sources said refinery utilisation had risen 25% at the end of October from the start of the month after drone attacks on facilities subsided.

Details of the Quota System

Quota Expansion and Export Agreements

Under the current diesel export ban, the government permits limited exports through a quota system. Those quotas will quadruple from October levels to 2 million metric tons, or about 0.5 million barrels per day, in November, the sources said. Shipments under existing intergovernmental agreements will also continue.

The Energy Ministry did not respond to a request for comment.

The current ban on diesel exports is due to expire on October 31.

Exemptions and Future Adjustments

In October, the government exempted several refiners from the ban and granted them export quotas totalling 0.5 million tons, the sources said. A new government order expected in early November would expand the list of exempt refiners and set new export limits. If the quotas are used up quickly, the government could consider increasing them further, the sources added.

Market Impact and Outlook

Domestic Supply and Export Needs

Nominal diesel production in Russia exceeds domestic consumption by about 40%. As refineries return to normal operating rates, they will need export outlets to prevent a domestic glut.

Reporting and Editorial Notes

(Reporting by Reuters. Editing by Mark Potter)