Russian refiners ramp up diesel output after US deal, sources say

Russian Diesel Output Climbs Post-US Supply Agreement as Export Quotas Granted

Russian Diesel Production and Export Developments Following US Agreement

Background of the US-Russia Diesel Supply Deal

Oct 26 (Reuters) - Russian refiners are raising diesel production in October after the government granted export quotas following the Kremlin's supply agreement with the United States, said two industry sources close to the matter.

US President Donald Trump said on October 9 that Russian President Vladimir Putin had agreed to a deal to supply diesel from Russia to the United States and global markets, with the US temporarily lifting its sanctions on Russian fuel.

Details of the Diesel Supply Agreement

Russia confirmed the deal and Trump said that Russia would deliver more than 300,000 metric tons (about 2.25 million barrels) of diesel immediately, followed by another 500,000 tons in November and 1 million tons straight after that. He said Russia would also supply a further 3 million tons, depending on the condition of its refineries.

Impact of Export Quotas and Ban Exemptions

Traders said that, from October 1, the Russian government had allowed exemptions to its ongoing diesel export ban to issue quotas enabling Russia to supply fuel under the Trump deal.

Since Russia's diesel export ban took effect in August, its oil companies have had to cut production to match domestic needs while limiting supplies to Central Asian countries under intergovernmental agreements.

Production Trends and Domestic Consumption

Industry sources said diesel output in Russia fell in the first half of October to about 160,000 tons per day, from 175,000 tons per day in September. After the new export quotas arrived mid-month, production began to rise towards 180,000 tons per day.

Seasonal Factors Affecting Diesel Demand

Domestic consumption typically falls to about 140,000 tons per day in October, the sources said, referring to seasonal factors such as the completion of grains harvesting and the summer driving season. 

That would leave at least 40,000 tons per day, or more than 1 million tons a month, available for export. About 0.2 million to 0.3 million tons of that may be needed for neighbouring countries, the sources added.

Future Outlook for Russian Diesel Exports

The sources said they expect the government to keep the ban in place and use quotas to regulate exports, monitoring the domestic market and changes in production.

First Shipments and Ongoing Export Plans

LSEG data showed that a Malta-flagged tanker carrying 40,000 tons of Russian diesel bound for New York appeared on tracking systems on October 23.

The same day, Kremlin spokesman Dmitry Peskov said Russian diesel shipments to the United States would continue on a regular basis after the first tanker departed.

(Reporting by ReutersEditing by David Goodman)