Scramble for diesel-rich crude

The impact of the global gas and coal squeeze is rippling through the crude market, with the spot differential for Russia’s diesel-rich Sokol grade soaring on expectations that there will be more demand for substitutes this winter.

ONGC Videsh Ltd. sold a cargo for loading in early December at a premium of $5.20 to $5.30 a barrel over the grade’s benchmark, according to traders who asked not to be identified. That’s the widest spot differential since January 2020, data compiled by Bloomberg show.

Diesel and fuel oil are expected to be the main oilproduct beneficiaries of the crunch that’s roiling Asia and Europe. Generators in China and India are facing keen competition as they try to secure coal and natural gas in an already-tight market that’s seen thermal coal soar and liquefied natural gas hit a record.

Grades such as Sokol and ESPO load out of Russian Far Eastern ports, making them highly sought after by buyers in China, South Korea and Japan due to their short sailing time. These low-sulfur, medium-density varieties also yield a high proportion of distillates such as diesel and jetkerosene when refined.