Kuwait to Increase Diesel Exports to Europe Fivefold Ahead of Russian Sanctions

Kuwait plans to increase its exports of diesel and airline fuel to Europe this year, helping to make up for a drop in supplies from Russia. This will provide a much-needed boost to the continent's fuel supplies.

The Middle Eastern country is expecting to raise its diesel shipments to Europe fivefold from 2022 to 2.5 million tons, or roughly 50,000 barrels a day, according to a person familiar with the matter. It also wants to double its sales of jet fuel to almost 5 million tons, the person said.

The European Union is set to ban imports of refined oil products from Russia on Feb. 5 as punishment for the invasion of Ukraine. This could trigger a global shortfall of diesel, causing prices to spike to $200 per barrel this quarter, according to Bank of America.

According to analysts from JPMorgan Chase & Co., the EU was buying almost 1.3 million barrels of products from Russia per day as of late last year. Around half of that total was diesel.

In recent years, Kuwait has invested heavily in upgrading and building new refineries. The most significant investment has been the construction of Al-Zour, one of the largest oil refineries in the world. With a capacity of 615,000 barrels per day, it began exporting diesel and jet fuel late last year.

Kuwait Petroleum Corp., a state-owned company, does not plan to sell any jet fuel on the spot market, according to a person familiar with the matter. This means that the actual amount of jet fuel sent to Europe may be higher than 5 million tons.

Zour's first line, known as a train in the industry, is processing more than 205,000 barrels a day, according to a person familiar with the matter. The second train is expected to start by mid-February, and the third is expected to start by April, the person said.

Once Zour is fully operational, Kuwait's total refining capacity will rise to around 1.5 million barrels a day.

Other Middle Eastern oil producers are expected to boost fuel exports to Europe in 2023, including Saudi Arabia and the United Arab Emirates. This will help meet rising demand and offset any potential shortages.