Tight supply in Europe may lead to diesel shortages in the future
2023/10/16
Does the embargo on Russia put the EU in a difficult position?
According to Agence France Presse, the International Energy Agency stated in its monthly report that "10 months after the EU's embargo on Russian crude oil came into effect, European refineries are still working to increase processing rates and diesel production.
Olivier Gantois, Chairman of the French Petroleum Industry Alliance, agrees. For many years, Russia has been investing in order to supply diesel that meets European specifications, so the embargo measures have made the supply to Europe more complex
Do refineries in the Middle East have the ability to produce diesel that meets European standards? According to Olivier, there is nothing to worry about. The region accounts for over one-third of the world's seaborne oil trade and knows what to do.
What impact will the Israeli conflict have?
As for the impact of Hamas' attack on Israel on oil production, the International Energy Agency warned that "as the crisis develops, the market will remain vigilant" and stated that "if necessary, we are always ready to take action to ensure sufficient market supply. The Middle East conflict is full of uncertainty, and events are developing rapidly".
But Olivier believes that all parties involved in the conflict are not oil producing countries, so crude oil supply will not be affected.
Unless the conflict erupts and spreads to Gulf countries. Even so, Olivier still believes that the situation is optimistic. He pointed out that Saudi Arabia is implementing a strategy of normalizing relations with neighboring countries, including Iran, which is sufficient to avoid the risk of production stoppages in producing countries.
The price of oil has not skyrocketed for the time being. After the conflict began on the 7th, oil prices increased by 5% and then slightly decreased. The current selling price of oil per barrel is $86, far from the recent record breaking price.
However, there are still some doubts about global refining capacity. The International Energy Agency and OPEC have reached a consensus on this point. Global demand is growing at a rate of 2 million barrels per day, "Olivier said." However, refining capacity has not grown in sync. "This is why the International Energy Agency is calling for" refineries to increase production.
Is France more prone to oil shortages?
The International Energy Agency said, "We may need a mild winter to avoid oil shortages." This warning applies to the entire Europe, but not to France. The French mainly use electricity and natural gas for heating.
Olivier said that although France "imports half of its consumption of diesel", its current diesel supply "has not issued any warnings". The main distributors have developed the habit of signing contracts according to civilian years. Therefore, theoretically, France has sufficient supply before December, and negotiations for 2024 to obtain next year's quotation are also proceeding normally. Therefore, risks do exist, but they need to be viewed correctly.
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