North Sea crude trade has dropped as growing fears of a European diesel shortage has pushed producers to keep oil for their own refining systems, four trade sources told Reuters.

There have been no trades, bids or offers on the North Sea Platts trading platform for five consecutive sessions. Offers have also been limited in the Mediterranean, two traders said.

Russia’s invasion of Ukraine and related sanctions and boycotts have resulted in reduced supply of Russian Urals crude and refined oil products, such as VGO, which can be used as a refinery feedstock.

The biggest concern is diesel, as Europe relies heavily on imports because its refineries do not produce enough for the continent’s consumption. Russia accounts for around 50% of Europe’s diesel imports, largely via seaborne cargoes, said Neil Crosby, senior oil analyst at consultancy OilX.

Fears of European diesel shortages are permeating oil markets and Vitol’s chief executive Russell Hardy told the FT Commodities Global Summit on Tuesday that diesel rationing was possible.

As a result, crude producers are opting to keep oil for refining rather than selling it.

“If you’re an equity or term holder of [crude] barrels, and you have a refining system, then you’re unlikely to offer barrels out as security of supply is more important than small trading margins,” one trading source told Reuters.

“Gasoil supply is a real prompt issue,” another trader said, adding that the focus is on products and there were no offers for April North Sea barrels.

One market participant said this was adding perceived value to North Sea crude grades and reducing transparency on price.

North Sea crude grade differentials to North Sea dated have been at record highs since early March.
Source: Reuters (Reporting by Rowena Edwards and Alex Lawler; editing by Barbara Lewis)