Diesel prices in Nigeria are unlikely to reduce after Russia announced an export ban lift on Friday, October 6. Etulan Adu, an oil and gas analyst who spoke to Nairametrics said that other factors would still drive diesel prices to remain high in Nigeria, despite Russia’s export ban lift which is supposed to ease pressure on the global market.
The announcement made by the Russian government marks a notable relaxation of the stringent restrictions that were initially enforced on September 21, 2023. The earlier imposition of the ban had a direct impact on diesel prices, causing an abrupt surge.
Given Russia’s status as a major global supplier of diesel and a significant exporter of crude oil, any disruption in its export policies can swiftly reverberate through international markets, affecting pricing dynamics and supply chains.
The decision to lift this ban is likely a response to the need to stabilize diesel prices and alleviate concerns about supply disruptions, both within Russia and on the global stage, oil and gas analyst, Adu tells Nairametrics.
Adu said:
- “Lifting the ban in Russia would help in restocking the depots and slow down the hike in prices. With the forex volatility in Nigeria, diesel prices won’t be on the downward trend but rather remain on the high side.
- “Nigeria imports the bulk of the diesel for its use as the refineries undergo rehabilitation. Diesel is deregulated in the country. Nigeria is one of the top gasoline and diesel importers from Russia, which implies that market restrictions would affect prices and stocks in the nation’s depots.
- “However, considering that Brent crude oil price recorded a drop last week and is $87 per barrel as of Monday morning, diesel price would drop. The current stock levels would affect manufacturers and could lead to higher trucking and logistics costs, elevating concerns about inflation.
Also, Adu told Nairametrics that on another level, the United States diesel inventory is low amidst an increase in demand as winter approaches, he stated further that this could put pressure on the global markets.
What to expect
According to Adu, refinery outages, changed global oil trade flows, a cautiously optimistic freight market in the United States, and inventories at some of the lowest levels in years have tightened the diesel market and are likely to tighten it further in the coming months, especially if a cold winter hits the Northeast, where diesel and other distillate supplies are very tight.
However, in Nigeria, the Lagos-based Dangote Refinery had pledged to start refining diesel and jet fuel this month of October. This could lead to an ease in the local diesel market in the country.
Backstory
On September 21, Russia implemented a significant measure by imposing a temporary ban on diesel exports to all nations, excluding Belarus, Kazakhstan, Armenia, and Kyrgyzstan.
The primary objective was to restore stability in its domestic market, addressing concerns related to diesel availability and pricing.
Yet, just four days later, on September 25th, Russia took a step back from some of these stringent restrictions. The revised policy now permitted the export of bunkering fuel intended for specific vessels and diesel exhibiting higher sulfur levels.
This adjustment in approach came amidst the backdrop of a worldwide diesel shortage, a situation that had already driven diesel prices upwards.
The initial move to restrict diesel exports highlighted Russia’s focus on securing its domestic market and stabilizing fuel prices within the country.
However, recognizing the larger global context and the potential strain on the international market due to the diesel shortage, Russia demonstrated a willingness to balance its domestic priorities with broader considerations of ensuring a smooth supply chain for essential commodities like diesel, particularly for vessels and industries reliant on higher sulfur level diesel.