The worst rise in diesel fuel prices awaits Europe in the spring

In February, Europe will stop accepting fuel delivered by sea from Russia. And just a month later, in March, the reserves of diesel fuel in the region will fall to record low levels, the lowest over the past 12 years. Thus leading to higher prices.

As observations show, there are some pluses in the current situation. The profitability of European oil refineries is growing. They want to produce the maximum amount of fuel possible while the region still has crude oil coming from Russia. This month, output is forecast to rise by 420 000 barrels to 6.14 million.

By December, diesel fuel stocks in Europe should reach 3 million barrels. It seems like a lot. But as soon as access to new supplies stops, stocks will quickly run out. And fuel will start to rise in price fast, even this year’s numerous price increases might seem fair in comparison.

The fact that Russia is Europe’s main fuel supplier is only part of the problem. Prompt delivery on exchanges in the region consistently costs more than futures. This means that it is always profitable for the supplier to sell diesel right now, and not to keep some of the supplies for selling at a later date. This is also why fuel has never been stored in sufficient quantities in the region. Whether the current crisis will help break this trend remains to be seen.