Heard on the Street: Europe is weaning itself off Russian energy in stages, and the next phase could bring fat profits for refiners
Europe is weaning itself off Russian oil and gas in steps. The next phase, targeting oil products such as diesel and jet fuel, could bring fresh snags for buyers and fat profits for refiners.
This weekend, the European Union stops importing petroleum products from Russia. This follows a ban on shipments of crude oil that came in early December, and before that, August’s coal embargo.Agenda-setting analysis and commentary on the biggest corporate and market stories from our Heard on the Street team.The crude ban was a nonevent, despite some trepidation. Instead of reducing global supply and causing prices to rise, Russian oil that used to go to the EUto India and China.
However, the market doesn’t look as prepared for this ban as it was for crude, particularly for diesel. Europe gets over half its diesel imports from Russia, and so far, little has been redirected. Two weeks before the crude oil embargo deadline on Dec. 5, around 50% of flows to Europe had already been rerouted, which minimized disruption when the ban kicked in.
Europe’s diesel crack spreads, which track the difference between the price of crude oil and the cost of diesel, have been volatile lately. The spread is currently around $33 a barrel, down from $48 late last month.
In this scenario, the winners would be refiners who already enjoyed bumper profits last year. Stocks such as Tupras and Saras have gained 11% and 28%, respectively, this year as investors anticipate fat margins.
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