Russian fuel exports drop as Ukraine intensifies its strikes on oil refineries

September 24 ------ Ukraine’s drone strikes on Russian oil refineries have disrupted domestic supplies and pushed Russia’s diesel exports towards their lowest levels since 2020.

Sixteen of Russia’s 38 refineries have been hit since the start of August, some of them multiple times, including one of Russia’s largest fuel-processing facilities, the 340,000 barrel-a-day plant at Ryazan, close to Moscow.

The strikes have disrupted more than 1mn barrels a day of Russia’s refining capacity, according to Energy Aspects, a research group. Diesel exports, if they maintain the current rate, will fall to the lowest monthly total in September since 2020, according to both OilX and Vortexa, which track cargoes. “It seems to be the most effective campaign that Ukraine has carried out so far,” said Benedict George, head of European petroleum products pricing at Argus, which reports commodity prices.

Russia is the second-largest diesel exporter in the world, with about half its cargoes going to Turkey, followed by other markets in west and north Africa and Brazil — as the EU and UK do not directly import the Russian fuel. While Moscow has imposed export bans on Russian gasoline for the most part of this year, its diesel sales abroad have so far been unrestricted.

George said Turkey had turned to India and Saudi Arabia to make up for the shortfall, and that premiums for diesel have risen this month to about $25 to $30 a barrel over the price of benchmark Brent crude oil. This is the highest level since summer, when Israel’s war with Iran sent prices to a 15-month high over supply fears. Amrita Sen, co-founder of Energy Aspects, said the impact of the attacks had taken time to be reflected on the markets, given Russia’s size. “You have a refinery going down, but it might take three weeks between that refinery producing and that diesel getting to the port,” she said.

Uncertainty over supplies of both diesel and crude is helping to prop up prices at a time when many analysts have predicted prices would start to fall. Ukraine’s President Volodymyr Zelensky is expected to urge US President Donald Trump to back tougher sanctions against Moscow when they meet at the UN General Assembly on Tuesday. But the Ukrainian leader earlier this month pointed to the success of the drone strikes, saying that “the most effective sanctions — the ones that work the fastest — are the fires at Russia’s oil refineries, its terminals, oil depots”.

Last week, Zelensky told reporters, including the Financial Times, that Ukraine was increasing its long-range drone production and intensifying its strikes on Russia’s energy infrastructure to bring the war closer to the Kremlin. “Once the number of drones matches the Russians’, they will feel the fuel shortage and loss,” he said. “We already see this increasingly. More drones are reaching targets.”

Among the dozens of damaged Russian oil and gas facilities were also some located more than 1,000km from the Ukrainian border, according to officials in Kyiv and independent analysts. Last Thursday, Ukrainian drones flew about 1,400km and hit the Gazprom Neftekhim Salavat oil refinery and petrochemical plant in central Russia’s Bashkortostan. Ukraine’s SBU security service took credit for the strike that it said hit the center of the facility, sparking a “strong fire.”

Another Ukrainian strike that day targeted one of Russia’s biggest refineries in Volgograd, almost 1,000km south of Moscow. On Saturday, Ukraine hit two more Russian refineries in Saratov and Novokuibyshevsk, south and east of Moscow, according to Kyiv officials and confirmed by Russia’s defense ministry.

The Ukrainian drone attacks have also prompted Moscow to temporarily halt internet services, leading to disruptions for consumers, companies and public services. Russia has yet to face shortages of diesel, whose production exceeds domestic demand by more than 50 per cent. Diesel is the main fuel for the agricultural sector, and is in use by some military units, tanks in particular. Others, including those used to transport the wounded, require gasoline, which is in short supply.

A growing number of Russian regions, including occupied territories, face gasoline shortages. Wholesale prices have surged more than 40 per cent since January. George said Ukraine had carried out a similar, though less effective, drone campaign last autumn, when “Russia needs the diesel for its tractors. Also, lots of Europe’s largest refineries close for planned maintenance at this time of year.”

Russia in recent months has escalated its own aerial bombardments, with missiles and drones targeting Ukrainian military and civilian infrastructure, including energy facilities, weapons factories and railway lines. A huge assault in late August badly damaged the EU mission and British Council buildings in Kyiv, along with dozens of other buildings. Russian drones this month also breached Polish and Romanian airspace, and fighter jets flew over Estonia, prompting widespread condemnation and triggering Nato consultations under its Article 4 procedure.

Source: ft.com