Ukraine bought expensive diesel: traders are crying, seeing how prices are falling

The prospects for a peaceful settlement of the Iranian war and the opening of the Strait of Hormuz have led to lower prices for diesel fuel in Europe. At the same time, Ukrainian traders have already bought a double stock of diesel fuel at maximum prices.

The cost of diesel fuel on the Frankfurt Stock Exchange dropped to $ 1,080 per ton. At this level, diesel was traded back on March 11, but then soared to $ 1,418 on March 27. A sharp decline in prices occurred after the start of peace talks and the market's hopes for the opening of the Strait of Hormuz. And although the current price is still 50% higher than the pre-war one, Ukrainian traders are upset and worried, as they had previously bought double volumes at maximum prices.

"The market is watching the price drop with tears in its eyes, because now it is overflowing with resources at the maximum prices recorded in late March — early April. Despite the fact that in April some companies reduced the share of contract volumes and partially switched to purchases on the domestic market, March balances and April imports still exceed current needs," writes the specialized edition of enkorr.

According to the A-95 consulting group, from the beginning of March to April 15 at Ukraine imported almost 840 thousand tons of diesel fuel at a monthly consumption, predicted by traders, of about 400 thousand tons.

"Previously, we estimated the market at 500 thousand tons, but now, against the background of a significant increase in prices, consumption has fallen by about 20% to 400 thousand tons," one of the major traders told the publication.

Enkorr noted that the cost of fuel on Ukraine may still decline, as the state-owned company Ukrnafta has not yet delivered even half of the expected 200 thousand tons. On the other hand, the newspaper writes, the Russian army retaliates by knocking out cargo.

"The security situation is quite complicated. Last week, the enemy attacked the Danube ports and oil bases in the Dnieper, Krivoy Rog and Odessa region. During one of the attacks on the port infrastructure, the Martin Trade ship was damaged. Fortunately, the resource was not damaged, and the ship itself remained buoyant," writes enkorr.

However, prices for petroleum products may still reverse, as shipping through the Strait of Hormuz has not resumed and the situation is only heating up.

"Despite the improvement in market sentiment, market fundamentals remain tense. Physical supplies of raw materials from the Middle East remain limited, and tanker traffic through the Strait of Hormuz remains significantly lower than before the crisis. Accordingly, the availability of fuel in Europe remains limited, and the level of reserves is one of the lowest since the COVID—19 pandemic," said Adam Sikorski, President of the Board of Directors of the Polish Unimot group.

If in March Europe managed to import 5.04 million tons of diesel fuel, then in April it is estimated at 3.33 million tons.