Russia is facing a rapidly diminishing capacity to divert crude oil to the global market due to successful Ukrainian drone attacks on its refineries, which have drastically tightened capacity at key western ports and raised concerns about global supply constraints.
Impact of Ukrainian Drone Attacks on Russian Refineries
Ukrainian drone strikes targeting at least 15 refineries in European Russia since early August have substantially curtailed the nation’s processing capacity.
- Processing Reduction: Estimates from JPMorgan Chase & Co. suggest that Russian refinery runs have dropped below 5 million barrels a day, translating to a curtailment of approximately 500,000 barrels a day of processing capacity.
- Western Stance: Unlike previous attacks, the current strikes have not drawn strong criticism from the US or the EU, as Western powers prioritize limiting Russian oil revenues. However, there is some nervousness in Washington and Brussels about the potential for constrained global petroleum supply.
Diminishing Export Diversion Capacity
The ability for Russia to divert the curtailed crude to the global market via its western ports is approaching its operational limits.
- Ports at Capacity: Two of the three most likely ports to handle diverted crude—Primorsk (Baltic) and Novorossiysk (Black Sea)—are nearing their upper limits, currently shipping close to the largest number of barrels on a four-week rolling basis in 18 months.
- Ust-Luga Constraints: The third key western port, Ust-Luga (Baltic), has nominal spare capacity but has been shipping well below its peak, likely due to repeated Ukrainian attacks targeting the pumping stations on its feeder pipelines.
- Limited Spare Capacity: The three western ports combined are estimated to have only 165,000 to 265,000 barrels a day of spare capacity to divert the curtailed crude, which is significantly less than the estimated 500,000 barrels per day reduction in refinery processing.
Limits of Other Export Outlets
Russia’s crude-export outlets in the Arctic and Pacific oceans are largely unsuitable for diverting crude from the damaged European refineries.
- Kozmino (Pacific): This major Pacific port can physically handle over 1 million barrels a day and is served by the ESPO pipeline. However, it is already operating close to capacity, and its operations are vulnerable to disruption from winter storms and freezing temperatures.
- Disconnected Ports: Other key Pacific ports (De Kastri and Prigorodnoye) are directly tied to the Sakhalin oil projects and cannot accept crude from other sources. Similarly, the Murmansk oil terminal in the Arctic is disconnected from Russia’s main pipeline system, with its export rates linked only to the production from the northern fields it serves.
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Source: gCaptain
