Russia extends diesel export ban 1 month as supply crunch deepens

Moscow will prolong its diesel export ban through mid-August, deepening a global supply crunch that has already pushed diesel prices to multi-year highs and forced buyers from Brazil to Italy to scramble for alternative cargoes.

Russia is extending its diesel export ban by one month through mid-August, two sources familiar with the discussions said, as Ukrainian drone strikes on refineries continue to disrupt domestic fuel supply and keep global markets on edge.

"The restrictions will remain until the domestic market stabilizes, but could be lifted sooner if the situation improves," one of the sources said, speaking on condition of anonymity because the discussions are private.

Diesel and gasoil loadings from Russian ports averaged 234,000 barrels per day from July 1 to 10, according to Kpler, down from 400,000 bpd in June and a fraction of the 817,000 bpd average for all of 2025. The ban, initially imposed July 8 through July 31, was part of a broader package that also extended gasoline export restrictions through year-end, Deputy Prime Minister Alexander Novak confirmed last week.

The extended ban tightens an already strained global diesel market, forcing regular Russian buyers such as Brazil and Turkey to compete with European nations for alternative supplies from the U.S. and Middle East. Italy last week slashed diesel duties by €0.17 per liter through Aug. 6, spending €125 million to contain protests over surging fuel costs.

The supply disruption has rippled through financial markets. Hedge funds boosted net long positions in ICE gasoil futures and options to 84,540 lots last week, the highest on record, according to exchange data. ICE Brent crude traded near $87 a barrel Tuesday, with traders pricing in sustained tightness in middle-distillate markets. Open interest in ICE Brent has fallen 11% year over year, amplifying price swings as lower liquidity magnifies the impact of each new supply headline.

Russia, typically the world's second-largest diesel exporter after the U.S., has seen its export capacity crippled by repeated Ukrainian drone attacks on refinery infrastructure. The attacks have left some southern regions short of fuel and forced Moscow to prioritize domestic supply over export revenue. The last time Russia imposed a comparable export ban was in September 2023, when a similar combination of refinery outages and domestic price spikes led to a temporary restriction that lasted two weeks before being partially lifted. That earlier episode removed roughly 300,000 bpd of diesel from global markets for about 10 days before the government carved out exceptions for pipeline exports and existing contracts.

The broader OPEC+ group is expected to halt its gradual output increases after September and keep production steady through the remainder of 2026, buying time for negotiations over increasingly contentious national production quotas for 2027, according to delegates familiar with the matter. That decision, combined with Russia's extended product export restrictions, points to a prolonged period of tight supply for both crude and refined products. The seven-member group's production strategy will be a key focus at its next ministerial meeting, scheduled for October.

For consuming nations, the stakes are high. Diesel is the backbone of global freight, agriculture, and industrial activity, and sustained price increases risk feeding into broader inflationary pressures. The International Energy Agency has warned that the loss of Russian diesel exports — which averaged about 1 million bpd before the war in Ukraine — represents one of the most significant structural supply shocks to the global refining system in decades. European diesel imports from sources outside Russia have already risen sharply, with the region turning to U.S. Gulf Coast refiners and Middle Eastern producers to fill the gap.

The Russian energy ministry declined to comment ahead of a formal government decision on the ban extension. Novak said last week that the diesel export ban would be lifted "as the market recovers," suggesting the government is monitoring domestic fuel prices and retail availability closely before committing to a timeline.

This article is for informational purposes only and does not constitute investment advice.