Ukraine’s drones targeted at least eight of the 10 biggest refineries last month, as per Bloomberg’s tally of public statements from both countries.
Kyiv has intensified strikes on Russian energy infrastructure to curb Moscow’s ability to benefit from higher oil prices amid the Iran war. It has also doubled down on a strategy of repeatedly attacking selected sites to inflict maximum damage and prevent quick repairs. The Yanos refinery, co-owned by Rosneft PJSC and Gazprom Neft PJSC, was targeted three times in May, while Lukoil PJSC facilities in Nizhny Novgorod and Perm were each hit twice.
The impact on Russian supplies comes as the global market has focused on the crucial Strait of Hormuz, where flows have all but halted during the Middle East conflict. As well as risking a domestic fuel crunch, the attacks in Russia have also seen Moscow ramp up its crude exports in recent weeks — offering relief to Russian oil buyers who’ve lost Gulf barrels.
Lower Russian refinery runs are putting pressure on the government to prevent a fuel crunch and spike in pump prices. Higher fuel costs previously caused protests, including in 2018, and have contributed to inflation. To safeguard local supplies, authorities have banned jet-fuel exports until the end of November, in addition to an existing ban on most gasoline sales to foreign markets.
Refinery runs are set to fall even more due to offline plants and reduced operations. May’s average should total 4.58 million barrels a day, according to estimates from analytics firm OilX. That’s down about 700,000 barrels a day, or 13%, from a year earlier and the lowest since October 2009.
Ukraine’s attacks mark a shift in strategy from previous years. It’s now not only targeting primary refining units — which have been relatively easy and quick to repair — but also secondary units, including high-value and technically complex ones, Sergey Vakulenko, an industry veteran and a scholar at the Carnegie Endowment for International Peace, told Bloomberg.
Secondary units help refineries produce more gasoline and diesel, but can be much harder and costlier to repair as Western sanctions make it difficult to source replacement equipment from overseas, Vakulenko said.
In addition to refineries, drones are targeting export terminals and oil pipeline infrastructure, such as pumping stations. Ukraine has also been attacking storage facilities, and if Russia hoped to produce and store more fuel to avoid a repeat of fuel crises seen in recent summers, then that might be more difficult with reduced capacity and storage volumes, Vakulenko said.
In total, there were at least 30 strikes on Russian oil assets in May, the most for any month since Russia’s full-scale invasion, the data compiled by Bloomberg show.
Still, Russia’s road-fuel market is some way off the deep crisis it saw in 2023, when prices jumped so much that President Vladimir Putin criticized the government for being too slow to react.
The current impact at the pump has been muted, with average gasoline prices rising by just over 2 rubles ($0.03) since the start of the year to 67.53 rubles per liter, Federal Statistics Service data show.
So far, only Russia-occupied Crimea has rationed road-fuel purchases. Last summer, fuel shortages affected Russia’s Far East as well as Russian-occupied Ukrainian territories.
The relative calmness right now could be partly due to the fact that many filling stations are owned by major Russian producers, who source their own fuel and who benefit from state subsidies designed to encourage domestic sales. A reimposed ban on most gasoline exports since April 1 has also bolstered local supplies.
However, there are some signs that supplies are tightening.
As of late May, daily volumes of premium gasoline 95 offered for delivery in the European part of Russia fell to around 5,000 tons per day, a third of what was on offer a year ago, according to the St. Petersburg International Mercantile Exchange. At the same time, prices of this type of fuel on the key commodities bourse jumped more than 20% year-on-year.
That likely makes it harder for regional gasoline-station networks not affiliated with oil majors to buy wholesale fuel on the exchange, risking running dry or having to purchase more expensive supplies elsewhere.
Despite the refinery attacks, Moscow sees no current risk of fuel shortages, Kremlin spokesman Dmitry Peskov told reporters on May 21. He cited seasonal maintenance for lower refinery output in some regions, adding that Russia’s overall fuel supply and demand is balanced.
With inputs from Bloomberg
