Russian refiners are processing more crude oil in hopes of boosting fuel exports after new U.S. sanctions on Russian tankers and traders hampered raw crude exports, two industry sources said and data showed.
Russia has been trying to adapt to Western sanctions imposed in response to the invasion of Ukraine since 2022 by buying a new fleet, diverting oil exports to Asia from Europe and finding new fuel customers in Africa and Latin America.
The latest US sanctions imposed on the Russian oil industry in January have made crude exports to key Asian customers in India and China more expensive and complex.
Russian refining operations rose 2%, or 108,000 barrels, to 754,800 metric tons per day on Jan. 15-19 from the first week of the year, according to the sources.
It was also up 1.2% from the January 2024 average.
Russia has slightly broader options for fuel exports compared to crude oil thanks to a G7 price cap.
Under the cap, Moscow can use Western fleet and transport services if it sells crude oil at prices below $60 per barrel and diesel at less than $100 per barrel.
The price cap of $60 per barrel is lower than the current price of Russia’s flagship Urals blend of around $70.
Traders say that, for the moment, the price cap imposed on products that are traded at a premium over crude oil, mainly diesel, which stands at $100 per barrel, still leaves room for profit. Russian diesel is currently trading at around $75 per barrel.
They also point out that the availability of ships is greater for fuel than for crude oil.
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Russian refinery increases its oil processing by up to 8%
Russia’s efforts to boost refining are complicated by Ukrainian drone attacks and an overheating economy.
Top Russian oil producer Rosneft has also said refinery modernization plans may have to be abandoned.
Still, sources said Russian refiners were producing as much as they could, banking on better chances of finding vessels to export fuel after crude tankers had been sanctioned.
“We have to use oil processing as much as we can to use the (sanctioned) oil,” an industry source said.
The sanctions, announced by the Biden administration in early January just before new US President Donald Trump took office, targeted about 180 tankers involved in transporting mostly Russian oil and much smaller volumes of fuel.
In 2024, those tankers carried about 1.5 million barrels of crude oil per day and only 200,000 barrels per day of refined products, according to Morgan Stanley analysis.
The sanctions also targeted Russian oil companies Surgutneftegaz and Gazprom Neft.
According to one of the sources, Surgutneftegaz’s Kirishi oil refinery in western Russia increased oil processing by almost 8% between January 1 and 21, compared to December 1 and 27.
Russia is one of the world’s largest maritime exporters of diesel and fuel oil. Western officials have said they are not seeking to completely stop Russian exports, but rather to reduce revenues so Moscow stops the war in Ukraine.
With information from Reuters.
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