Russian Refiners Ramp Up Diesel Output to Supply Trump Deal

Russian refiners are increasing diesel production for October, in line with an export quota agreement between Moscow and Washington. Daily production dropped from 175,000 tons in September to around 160,000 metric tons for the first half of the month. Production has since climbed towards 180,000 tons a day following the introduction of the quotas in mid-October.

Russia typically consumes about 140,000 tons of diesel daily in October, following the end of the grain harvest and summer driving season. This leaves at least 40,000 tons a day, or over 1 million tons a month, for export. Between 200,000 and 300,000 tons of this is likely to be exported to neighboring countries under intergovernmental agreements.

The Russian government plans to maintain its diesel export ban, enacted in August, while using quotas to regulate exports. US President Donald Trump announced on October 9 that Russia would initially ship more than 300,000 tons of diesel, followed by 500,000 tons in November and 1 million tons later. Additional 3 million tons would depend on the state of Russia's refineries.

The US has temporarily lifted sanctions on Russian fuel to facilitate the trade, with a six-month Treasury waiver issued on the same day. Analysts believe the shipments, starting with a tanker carrying about 40,000 tons of ultra-low sulfur diesel from Primorsk to New York on November 7, will not significantly impact the market. Standard Chartered warns that Russia will face challenges in raising diesel output in the near term due to Ukrainian drone strikes damaging its refineries, which will require months to repair.

The strikes resumed on October 15, after a three-day suspension, potentially threatening the October recovery.