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Russian Diesel Export Lift Won't Lower Nigerian Prices- Expert


Following Russia's recent decision to lift its export ban on diesel, there is little optimism for a reduction in diesel prices within Nigeria. This announcement, made on October 6, has raised expectations of relief in global diesel markets.


However, according to insights from Etulan Adu, an oil and gas analyst interviewed by Nairametrics, several other factors will continue to exert upward pressure on diesel prices in Nigeria, mitigating the anticipated benefits of Russia's export ban lift.


The Russian government's initial imposition of stringent export restrictions on September 21, 2023, had a direct and immediate impact on diesel prices in Nigeria, leading to an abrupt surge. Russia holds a significant position as a major global supplier of diesel and a substantial exporter of crude oil. Consequently, any disruption in its export policies can swiftly reverberate through international markets, causing ripple effects on pricing dynamics and supply chains.


The decision to lift this export ban can be interpreted as a strategic move by Russia to address concerns related to stabilizing diesel prices and alleviating supply disruptions, both domestically and on the global stage. Adu, the oil and gas analyst, suggests that while this move may assist in replenishing diesel stocks in Russia and slowing the price hike, other compelling factors will keep diesel prices in Nigeria elevated.


Nigeria largely depends on diesel imports, particularly due to ongoing refinery rehabilitation and the country's deregulated diesel market. Nigeria ranks among the top importers of gasoline and diesel from Russia, making it vulnerable to market restrictions that can significantly impact prices and fuel stocks in the nation's depots.


The fluctuating foreign exchange rates in Nigeria add another layer of complexity to the diesel price scenario. Despite a recent drop in Brent crude oil prices, currently standing at $87 per barrel, the existing stock levels in Nigeria could exert pressure on manufacturers and lead to increased trucking and logistics costs, raising concerns about inflation.


In a global context, Adu points out that the United States faces a challenging situation, with low diesel inventory levels and a surge in demand as winter approaches. This imbalance could exert additional pressure on global diesel markets. A combination of factors, including refinery outages, shifts in global oil trade flows, a cautiously optimistic freight market in the United States, and historically low inventories, have already tightened the diesel market. This tightening is expected to persist, especially if a cold winter affects the Northeastern region of the United States, where diesel and other distillate supplies are in short supply.


However, amidst these complex dynamics, there is a glimmer of hope for the Nigerian market. The Dangote Refinery, based in Lagos, has pledged to commence the production of diesel and jet fuel in October. This local production could potentially ease the strain on the Nigerian diesel market, providing some relief to consumers and businesses grappling with high diesel prices.


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