The price of diesel is predicted to increase significantly in the near future, as a result of strikes in European refineries, maintenance-related shutdowns, and a ban on Russian supply imposed by the European Union, which will all contribute to a decrease in supply.
Last week, employees at three refineries run by TotalEnergies in France went on strike in response to the French government’s proposed pension reform, which includes raising the retirement age. As a result of the strike, diesel deliveries to the wholesale market were halted by the three facilities and one of them reduced production significantly.
According to European media reports, twice as many major refineries will be shutting down for maintenance in order to make up for delays caused by the pandemic. This will result in a decrease in the amount of diesel being refined and exported. `
Diesel markets may also be impacted by the EU’s decision to impose an embargo on Russian fuel imports starting February 5. Russia is the main supplier of fuels, particularly diesel, to the EU.
In anticipation of the embargo, traders are purchasing large quantities of Russian diesel, with the amount of diesel being stored in tanks reaching the highest level in a year, as reported by Reuters.
Supplies from the United States, which can sometimes help to stabilize the diesel market, may not be available this time as diesel shipments are being redirected from their intended destinations in Europe to new ones in the US. As a result of the embargo, traders will lose access to Russian diesel within a few days, but there is not enough supply for both Europe and America, which will cause prices to rise even more. In Nigeria, diesel prices are not regulated and oil marketers are supposed to set prices based on current oil prices, but this is not happening.
Analysts attribute the discrepancy between diesel prices at petrol stations nationwide and fluctuating global oil prices to the actions of a domestic cartel controlling the pricing of diesel. With the shutdowns which is understood to be maintenance related, strikes on 3 major refineries in Europe and the Russian embargo, the prices of AGO/MGO is expected to increase significantly in the near future.
Source: Businessday, Reuters
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