Trump’s diesel deal with Russia equals less than two weeks of U.S. demand

President Donald Trump‘s diesel deal with Russia is unlikely to significantly reduce fuel prices for truckers and farmers, because the amount that Moscow will supposedly export is very small compared with U.S. and global demand.

Since diesel is used to transport a broad range of goods as well as to harvest crops, its rising cost tends to trickle throughout the economy, boosting prices. As the U.S. midterm elections approach in November, Trump faces pressure to address fuel prices due to their impact on inflation.

Russia will supply 300,000 metric tons immediately to the global market, Trump said Friday in his Truth Social post. One metric ton of diesel is equivalent to about 7.45 barrels, according to S&P Global Platts.

The Kremlin, then, has agreed to initially export about 2.24 million barrels, or 74,500 barrels per day if spread out over an entire month.

This equals about 2% of total U.S. demand, which stood at 3.65 million bpd during week ended Oct. 2, according to the Energy Information Administration. It represents far less than 1% of the more than 28 million bpd that the world consumes, according to the International Energy Agency.

“It does not even touch the sides — it is very, very small,” Neil Atkinson, former head of the IEA’s oil industry and markets division, told CNBC’s “Squawk Box Europe” on Monday.

Ten days of U.S. demand total

Russia is supposed to ship another 500,000 tons or 3.73 million barrels in November, followed immediately by 1 million tons or 7.45 million barrels. Moscow will then release 3 million tons or 22.35 million barrels at a later date depending on the condition of the country’s refineries, Trump said.

Goldman Sachs estimated Monday that the Russian diesel slated for release in October and November would only reduce wholesale diesel prices by $1 to $2 per barrel on the U.S. Gulf Coast and in Europe.

In total, Trump’s diesel deal with Russia would supply the market with 4.8 million metric tons, or 35.76 million barrels, if the agreement is executed as announced by the president. This is equivalent to about 10 days of U.S. domestic demand or slightly more than a single day of global demand.

But the U.S. is a net diesel exporter so it does not need Russian supply, said Andy Lipow, president of Lipow Oil Associates. The European Union has banned imports of Russian crude oil and refined products. The Russian diesel would help ease competition for U.S. barrels in countries like Brazil and Turkey, Kpler analysts said in a Monday note.

“The volumes really are going to do very little over the medium to longer term,” Daniel Hynes, senior commodity strategist at ANZ, told CNBC’s “Squawk Box Asia” on Monday.

Political pressure

Diesel futures did not move much Monday in response to the deal, closing around 1 cent lower, and are trading higher Tuesday. It is a sign the market views the agreement as little more than a verbal intervention by Trump to show consumers he is doing something about fuel prices, Lipow said….