Brazil has overtaken Turkey in purchasing Russian diesel fuel

According to Kommersant, in October Brazil significantly increased imports of Russian diesel fuel, despite restrictions on its exports imposed by the Russian authorities. In the second half of October, Brazil even became the largest destination for diesel fuel exports from the Russian Federation, overtaking Turkey, and Russian companies became the main external suppliers of diesel fuel to the Brazilian market. Russian supplies to Brazil this year are winning price competition from American refineries, which have long been leaders in this market.

Brazil imported record volumes of diesel fuel from Russia for the year in October, despite restrictions on fuel exports from the Russian Federation introduced at the end of September. Thus, daily seaborne supplies of diesel fuel to Brazil in October increased by 27% compared to September, to almost 200 thousand barrels, according to Kpler data.

The Russian authorities banned the export of gasoline and diesel fuel on September 21 to reduce its cost within the country. But since the tanks were rapidly filling up and the refinery was threatened with a reduction in processing, two weeks later, relaxations were made for diesel fuel: its export through pipelines was allowed. The restrictions have not been completely lifted, and for gasoline they have not been eased. As a result, in September, marine exports of diesel fuel decreased by almost 25% compared to last month, to 765 thousand barrels per day (b/d), and in October it was about 780 thousand b/d.

Turkey has been the largest importer of Russian diesel fuel since January, accounting for about 30-40% of monthly volumes. However, in October, Russian companies reduced exports to this country, while supplies to Brazil, which is the second largest importer of Russian diesel fuel, on the contrary, increased sharply. Deliveries to Turkey in October amounted to just over 210 thousand b/d, while in September imports were at the level of 281 thousand b/d, Kpler data shows. Perhaps the redirection of exports is caused by the fact that the volume of diesel fuel shipments via pipelines through the Baltic ports is significantly higher than through Novorossiysk, while the transport route to Brazil from Primorsk is only 25% longer than the route to the southern coast of Turkey (via the English Channel and Gibraltar).

After the EU and G7 countries introduced an embargo and price ceiling on oil and petroleum products from the Russian Federation on February 5, 2023, Russian oil companies significantly expanded the geography of maritime supplies. The main buyers of seaborne oil shipments were India and China. Russian diesel fuel, which was supplied to Europe before the sanctions, began to be exported in significant volumes to Turkey, Brazil, Saudi Arabia and African countries (see Kommersant on July 18).

Previously, the United States was the largest exporter of diesel fuel to Brazil, but supplies have dropped significantly this year. In terms of total export volumes this year, the Russian Federation is already ahead of the United States, including due to discounts, although their size is gradually decreasing. The gap between offers for cargo sales from US Gulf of Mexico ports and Russian ports remains close to 20 cents per gallon ($8.4 per barrel), Argus notes. More significant discounts are possible when negotiating the sale of several cargoes at once. According to the agency, auctions of the state-owned Petrobras company in October, at which low prices were offered, contributed to a drop in supplies from refineries in the United States.

Prices in Brazil are more attractive for Russian companies than in Turkey, believes Victor Katona from Kpler, while the difference between the final price of Russian and American diesel fuel in Brazil is $6–8 per ton, while in Europe the spread between local supply options and Russian fuel prices range from $10–15 per ton. Turkey is much more convenient from a logistics point of view, but during the period of the export embargo, the remoteness factor did not matter, he believes. Until October 15, the Turkish market was a priority, and the reorientation of volumes is most likely a consequence of the ban on diesel fuel exports, the analyst believes.

Dmitry Kozlov