Tankers: Diesel Trade Landscape Changed After Surge in Russian Diesel Imports

The diesel trade in ton-miles demand is a totally different “animal”, after Brazil has significantly increased Russian diesel imports. In its latest weekly report, shipbroker Intermodal said that “the diesel import landscape in Brazil has undergone a significant transformation with a surge in Russian diesel imports, impacting the energy and shipping sectors. Diesel prices in Brazil experienced significant fluctuations lately, driven by the breach of the Russian price cap. Russia strategically increased exports of petroleum products to Brazil following EU and G7 embargoes and price caps. This reshuffled the global oil supply, prompting Russia to focus on new markets in Asia, Africa, and Latin America. Brazil, being the largest Latin American market, became a focal point, providing Russia with a competitive edge”.

According to Ms. Chara Georgousi, Research Analyst with Intermodal, “Russian diesel quickly dominated Brazil’s import market due to its substantial discount compared to US-origin diesel. The discount settled around 25-30 cents per gallon by spring, maintaining approximately 20 cents per gallon throughout most of the summer. Indeed, Brazilian imports of Russian diesel surged significantly, reaching 21 million bbls ytd, a significant increase from 444,000 bbls in all of 2022. Meanwhile, US-origin diesel imports are currently seen 49.5% lower y-o-y. Approximately 80% of diesel imports now originate from Russia”.

“The surge in Russian diesel imports has reshaped the diesel trade landscape, creating more opportunities for spot trading in delivered cargoes. The proliferation of distributors has increased the demand for market transparency, driving rapid market developments”, Intermodal’s analyst said.

Ms. Georgousi added that “in the meantime, Brazil’s energy sector witnessed a shift as Petrobras, a key player, adopted a new pricing strategy for domestic diesel and gasoline, replacing the import parity price policy in place since 2016. This strategy aimed to outperform competitors in pricing, safeguard margins, and gain market share. In August, Petrobras adjusted domestic diesel prices by 25.8%, striking a balance between political and financial considerations to remain competitive”.

“As September unfolds, the trend of Brazil’s diesel imports from Russia is expected to continue. Discounts of 15-20 cents per gallon for Russian diesel compared to US-origin diesel have reemerged after a brief narrowing. However, forecasts suggest that the spread may tighten in 2023, potentially leading to parity between Russian and US diesel imports into Brazil.

In a significant development, Russia has shipped its first crude oil cargo to Brazil since 2016, reflecting Moscow’s pursuit of new outlets for its fossil fuels. Brazil, as part of the BRICs alliance, holds a strategic position in emerging markets, making this crude oil shipment pivotal in Russia’s quest for energy partnerships”, she noted.

Intermodal’s analyst concluded that “Brazil’s increasing reliance on Russian diesel imports has reshaped its energy landscape, bringing significant changes to market dynamics. Indeed, if this trend continues in the coming months, the implications for shipping logistics, trade patterns, and market development will be substantial. Consequently, the ongoing evolution of these trends will be closely monitored to identify their lasting effects on Brazil’s energy landscape and its broader economic implications”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide