Russia risks facing a fuel crisis after a record month of strikes - Bloomberg
Kyiv • UNN
In May, drones attacked a record number of Russian oil facilities. This led to a drop in oil refining in the Russian Federation to its lowest level since 2009.
In May, strikes on Russian oil refineries hit a record, threatening to further damage Russian refining, which is at a 16-year low, and creating a risk of domestic fuel shortages in the Russian Federation just as summer demand rises, Bloomberg reports, according to UNN.
Details
According to Bloomberg, at least 16 attacks were carried out on Russian oil refining facilities in May. Data indicates that last month, drones attacked eight of Russia's 10 largest oil refineries.
"Kyiv has stepped up strikes on Russian energy infrastructure to limit Moscow's ability to benefit from higher oil prices amid the war with Iran. It has also doubled down on a strategy of repeated attacks on individual facilities to inflict maximum damage and prevent rapid repairs. The Yanos refinery, owned by PJSC Rosneft and PJSC Gazprom Neft, was attacked three times in May, while PJSC Lukoil facilities in Nizhny Novgorod and Perm were attacked twice," the publication says.
The impact on Russian supplies comes as the global market has focused on the vital Strait of Hormuz, through which supplies virtually ceased during the Middle East conflict. In addition to the risk of a domestic fuel crisis, the attacks in Russia also come as Moscow has increased oil exports in recent weeks, offering help to Russian oil buyers who lost barrels from the Gulf, the publication writes.
The decrease in production volumes at Russian refineries is putting pressure on the government to prevent a fuel crisis and a spike in prices at gas stations, the publication points out. Higher fuel prices have previously caused protests, notably in 2018, and contributed to inflation. To protect local supplies, authorities have banned the export of aviation fuel until the end of November, in addition to an existing ban on the sale of most gasoline to foreign markets, the publication writes.
Russia bans aviation fuel exports following strikes on oil refineries01.06.26, 11:59 • 3090 views
Refinery output in the Russian Federation is expected to decline further due to plant closures and reduced operating volumes. According to estimates by the analytical company OilX, the average for May should be 4.58 million barrels per day. This is approximately 700,000 barrels per day, or 13%, less than a year earlier, and is the lowest figure since October 2009.
Now the attacks are aimed not only at primary processing units, which were relatively easy and quick to repair, but also at secondary units, including high-cost and technically complex ones, marking a change in strategy compared to previous years, according to Sergey Vakulenko, an industry veteran and scholar at the Carnegie Endowment for International Peace.
Secondary units help refineries produce more gasoline and diesel fuel, but their repair can be much more difficult and expensive, as Western sanctions complicate the supply of replacement equipment from abroad, Vakulenko said.
In addition to refineries, drones are attacking export terminals and pipeline infrastructure, such as pumping stations. Ukraine is also attacking storage facilities, and if Russia hopes to produce and store more fuel to avoid a repeat of the fuel crises seen last summer, it may be more difficult with reduced capacity and storage volumes, Vakulenko said.
In total, at least 30 strikes were carried out on Russian oil assets in May, the highest figure for any month since Russia's full-scale invasion, according to data collected by Bloomberg.
Nevertheless, the Russian road fuel market is still somewhat far from the deep crisis it experienced in 2023, when prices jumped so much that Kremlin leader Vladimir Putin criticized the government for reacting too slowly.
The current impact at gas stations has been muted, with average gasoline prices since the beginning of the year rising just over 2 rubles ($0.03) to 67.53 rubles per liter, according to data from the Federal State Statistics Service of the Russian Federation.
So far, only Russian-occupied Crimea has rationed fuel purchases, the publication points out. Last summer, fuel shortages affected the Russian Far East, as well as Russian-occupied Ukrainian territories.
The relative calm now may partly be due to the fact that many gas stations are owned by large Russian producers who purchase the fuel themselves and receive state subsidies aimed at stimulating domestic sales, the publication writes. A re-imposed ban on the export of most types of gasoline since April 1 has also contributed to local supplies, the publication indicates.
However, there are some signs of supply contraction.
As of the end of May, daily volumes of premium 95 gasoline offered for delivery in the European part of Russia fell to approximately 5,000 tons per day, which is one-third of the supply a year ago, according to data from the St. Petersburg International Mercantile Exchange. At the same time, prices for this type of fuel on the key commodity exchange rose by more than 20% year-on-year.
This likely makes it difficult for regional gas station networks not affiliated with major oil companies to buy fuel in bulk on the exchange, putting them at risk of running out of fuel or buying more expensive fuel elsewhere, the publication notes.
Despite the attacks on refineries, Moscow does not currently see a risk of fuel shortages, Kremlin spokesman Dmitry Peskov told reporters on May 21. He cited seasonal maintenance as the reason for lower refinery production in some regions, adding that the overall supply and demand for fuel in Russia are balanced.