Russia Bans Fuel Exports As SPR Runs Low

Moscow has banned diesel and gasoline exports from September 21^st. The stated reason has been to stabilise the domestic market, which was seeing some shortages. The ban will remove 1 million barrels per day (mbpd) of motor fuel exports, 80% of which are diesel.

In Europe, gasoline prices rose by 2% on the day to almost $1,000 per metric ton. The new measure presents a further tightening of fossil fuel markets. On September 17^th, Bloomberg already reported that “the world’s oil refiners are proving powerless to make enough diesel”. In fact, prices of this derivative product have risen outpacing crude.

In the US, the Strategic Petroleum Reserve (SPR) is facing a dilemma. It is running out of supplies, as it attempts to flood the market and offset supply cuts. Soon it will have to restock, but prices hovering around $90 a barrel are 30% above the target price around $70.

Some US-based investors who believe that the Biden administration will have to source oil from sanctioned Venezuela and Iran. The former’s heavy crude is not compatible with the SPR, but it would nonetheless allow for an easing of prices if it were brought on the official market, and production grows with foreign investment.

In Venezuela, Chevron is planning on increasing production capacity by 65,000 barrels per day, by the end of 2024. It would be the first major drilling campaign since it obtained a waiver from Washington DC to operate in the country. The US oil giant’s ventures now produce around 135,000 bpd, according to independent estimates quoted by Reuters.

In November 2022, Chevron was given a license initially to just maintain, not expand, operations in Venezuela to recover its $3bn debt. The new goal would likely require new, large specialised drilling rigs. The plan therefore indicates in the direction of an easing of sanctions regarding the oil sector, at least regarding Chevron.