The European Union will have a ban on imports of Russian refined oil products, including diesel and jet fuel, which could disrupt global flows once it takes effect on Sunday, and could hurt Moscow more than an embargo on crude oil.
Although Western sanctions could force Russia to cut crude production and refining runs, which would tighten global supplies, analysts believe that the ban on products may have little impact on overall availability.
Senior research associate Ian Moore at global brokerage firm Bernstein said Barrels will find a market, logistical challenge but not a supply challenge.
Russia is facing a bigger problem in finding alternative buyers as China and India are keen to snap up its discounted crude oil, and they have plenty of their own refining capacity and are exporters of fuel products.
While the ban would leave Russia with more crude to export, there may not be enough destinations to export the surplus, and Russia may need to reduce production by 5% -- 10%, said Pei Hwa Ho, energy analyst at the DBS Bank.
Russia increased diesel supplies to African and Mediterranean ports in January to try to compensate for an absence of European buyers.
A lack of tankers to carry these products and a lack of demand could make it harder for Russia to divert refined fuels to third party markets.
Europe is looking for producers in Asia, the Middle East and the United States to diversify its sources of supply, but shipping will be costlier due to the longer sailing time.
In Europe, which is heavily reliant on Russian diesel imports, supplies remain abundant as traders stock up ahead of Western restrictions.
It is still unclear what the price cap for refined products can be, as their pricing, far more complex than crude oil, is dictated by differences in quality, determined by levels of sulphur and metals.
The EU has proposed a $100 per barrel price cap on diesel and a $45 cap per barrel on discounted products such as fuel oil, but member states are yet to agree on those levels, with states aiming for a deal on Friday.
The products ban on Russian crude oil if sold below a $60 price cap was approved by the G 7 wealthy nations, the European Commission and Australia.