Russia puts squeeze on oil market

Russia has barred the export of diesel and petrol as crude oil prices rise towards US$100 a barrel, marking a significant escalation that will raise fears Moscow is weaponising oil supplies in retaliation for Western sanctions.

Russia is one of the world’s largest suppliers of diesel and a leading producer of crude. Its crude exports have already been trimmed under a deal with Saudi Arabia and the wider Opec+ group, which has contributed to a 30 per cent jump in oil prices since June.

Market participants are concerned that Russia is moving to tighten oil supply at a time when central banks are struggling to get inflation under control, and with crude prices potentially poised to break above US$100 a barrel for the first time in 13 months.

“Russia wants to inflict pain on Europe and the US and it looks like they’re now repeating the playbook from gas in the oil market ahead of the winter months — they’re showing that they’re not finished using their power over energy markets,” said Henning Gloystein at Eurasia Group.

The Kremlin said the ban was “temporary” and designed to address rising energy prices in Russia, but gave no timeframe for when the measures would end and carved out only limited exceptions such as its own overseas military bases. But the timing will raise suspicions in western capitals that President Vladimir Putin is again leveraging Russia’s power over energy markets.

Russia’s increased use of natural gas supply cuts to Europe after its full-scale invasion of Ukraine last year helped to trigger a global energy crisis, stoking inflation and harming industries and consumers around the world.- Financial Times

“Russia said last year the supply cuts in gas were only temporary but continually tightened the noose,” Gloystein said. “With winter approaching, targeting diesel could easily propel oil back above US$100 a barrel, with all the uncomfortable ramifications that brings for the world economy.”

Diesel is the workhorse fuel of the global economy, playing a crucial role in freight, shipping and aviation. Derivatives of diesel such as heating oil are particularly susceptible to winter price surges. Germany and the north-east of the US are both heavily reliant on the fuel for heating homes—Financial Times 

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