Russian refineries have increased crude oil processing to enhance fuel exports following new U.S. sanctions on Russian tankers and traders, according to industry sources and data. The adjustments, including acquiring new fleets and redirecting oil exports to Asia, reflect Russia's response to Western sanctions since 2022 due to the Ukrainian invasion.
The recent U.S. restrictions have particularly impacted crude exports to key Asian markets like India and China. Reports show a 2% increase in Russian refining runs, reaching 754,800 metric tons per day from Jan 15-19 compared to the first week of the year, and a 1.2% rise from the January 2024 average.
Given the constraints, Russian fuel exports present slightly broader opportunities than crude oil under a G7 pricing cap. Moscow can utilize Western fleet and shipping services for crude sold below $60 per barrel and diesel below a specified price point. While the $60 per barrel limit is lower than the current market price for Russia's Urals blend, traders suggest profitability remains viable due to the cap on diesel trading at $100 per barrel versus the current $75 per barrel rate.
Amid challenges in refinery modernization and acknowledging abandoned plans by a top Russian oil producer, refineries are maximizing production to explore increased opportunities for fuel transportation following the tanker sanctions. "We have to utilize oil processing as much as we can in order to use (the sanctioned) oil," noted an industry source.
The recent U.S. sanctions, imposed just before the new President took office, targeted tankers primarily engaged in transporting Russian oil, affecting a significant volume of crude oil and a smaller portion of refined products in 2024. The sanctions also extended to Russian oil firms Surgutneftegaz and Gazprom Neft, prompting increased activity at facilities like Surgutneftegaz's Kirishi oil refinery in Western Russia.
Russia, a major global seaborne exporter of diesel and fuel oil, faces Western pressure to curb revenues to halt the conflict in Ukraine, rather than seeking a complete halt to Russian exports.