While experts reflect on the effects of the existing restrictions on Russian crude, another EU embargo, accompanied by a price cap, is expected to come into force very soon, on 5 February, this time on oil products. Though the details are yet to be worked out, EU officials have already warned that the products embargo and price cap will be more difficult to administer than the crude embargo and price cap. According to some media reports, the coalition plans to set two caps, one on products that trade at a premium to crude, such as diesel, and one on products that trade at a discount to crude, such as fuel oil.
While crude oil flows from Russia have been largely diverted eastwards to Asia, this region will not be as good a destination for Russian oil products, as demand there is likely to be low because of well-developed local refining facilities. Nevertheless, Russia is ramping up supplies to alternative markets, such as Turkey, with diesel supplies there growing from 3.99 million tonnes in 2021 to 5.05 million tonnes in 2022,
and Singapore, which took in more than double the previous year’s volume of Russian naphtha and fuel oil in December 2022 with a view to re-exporting them to other parts of the globe
(see Fig. 2). Note that refining margins in both Europe and Asia are high (see Fig. 3).