Oil Daily | EU Diesel Sanctions Tighten Market; Ukraine Boosts Azeri Gas Imports, Refiners Eye Gains

【Global Oil Supply and Demand】

The global diesel market faces structural tightening with new EU sanctions disrupting trade flows from Russian crude across Asia, the Middle East, and Europe. Imports of diesel processed in third countries like India and Turkey will be banned from 2026, affecting up to 20% of current imports, straining already low inventories.

Market observers warn of potential volatility despite muted pricing reactions. Rerouting flows from India and Turkey may disrupt Mediterranean balances and increase freight rates. Refiners in the Gulf, especially Saudi Arabia and UAE, might benefit from shifting demand as their feedstocks remain free of Russian origin, potentially sustaining high refining margins.

The EU's sanctions aim to close loopholes benefiting Moscow's exports, but they might squeeze refiners more than the Kremlin, affecting margins and sourcing strategies. Enforcement could be challenging.

【Oil-Producing Countries Dynamics】

Ukraine's Naftogaz signed its first gas supply agreement with Azerbaijan's SOCAR, marking a strategic shift in energy flows by bypassing Russian infrastructure. The deal, using the Trans-Balkan corridor, signifies Ukraine's entry into this network as an importer, setting the stage for deeper energy integration.

Ukraine relies more on Azerbaijani and U.S. LNG to offset declining Russian transits, with implications for Black Sea energy alignment. SOCAR's expansion in Europe and Ukraine's diversification efforts may strengthen the corridor for Azeri gas, enhancing regional cooperation.

Russian pipeline exports to Europe via TurkStream increased in May but dropped in June due to maintenance. Despite fluctuations, first-half 2025 exports marked a year-on-year increase of over 7%.

【Latest Oil Policies】

Africa's largest refinery owner, Aliko Dangote, urges Nigeria to ban fuel imports under the "Nigeria First" policy to promote local goods. Dangote highlights the substandard quality of imported fuels and their unfair competition with local refiners. His refinery aims to reduce Nigeria's reliance on imports and potentially become a fuel exporter.

【Industry News】

Eni's CEO, Claudio Descalzi, aims for profits from alternative energy to match oil and gas by 2030, exceeding them by 2040. Eni's satellite companies, involved in biofuels, wind, and solar, rely on hydrocarbon segments for profitability. Recent minority stake sales generated over $4 billion in cash.

【Others】

A senior UN climate official urges Australia to accelerate its energy transition plans beyond "bog standard" efforts. While supporting renewables, the government backs gas as a transitional fuel. Criticism arises over funding shortfalls and potential economic impacts. Australia's 2030 low-carbon target may fall short, according to Wood Mackenzie.