Reuters: Russian refineries cut oil output due to losses — some face closure

At least three Russian refineries have halted processing or cut output due to heavy losses amid export restrictions, rising oil prices and high borrowing costs.

Reuters writes about this with reference to sources.

Three factories — Tuapsyn, Ilsky, and Novosakhtyn — have suspended or reduced production in recent months.

The closure of refineries indicates the problems of the Russian oil refining industry, Reuters notes. Factories are being attacked by Ukrainian drones, and industry is suffering from Western sanctions against Russia, so refiners are forced to sell fuel at a discount.

This crisis is reducing fuel exports and corporate revenues, leading to reduced revenues for Russiaʼs budget amid high inflation and uncertainty in energy markets, which are already troubled by weak demand.

In 2021-2022, oil refiners around the world saw record profits due to a surge in demand after the coronavirus pandemic and the recovery of economic activity. But then profitability plummeted as huge refineries opened up around the world and demand growth slowed — in part because of attempts to move away from fossil fuels.

Less technologically advanced Russian refineries, which do not produce premium types of fuel, suffered the most. For several months in the second half of 2024, they suffered losses of up to $102 per metric ton.

Russia has 30 large and medium-sized oil refineries, as well as several small ones. Russia exports almost 2 million barrels of oil products per day, and consumes the rest independently.

Attacks on Russian refineries

This spring, Ukraine began to actively attack Russian refineries. In March, an oil refinery in the Russian city of Ryazan caught fire after a drone attack, drones attacked a refinery in the Nizhny Novgorod region and an oil depot in Oryol, an oil refinery in the Krasnodar region. Meanwhile, the Lukoil refinery in the Nizhny Novgorod region lost part of its capacity due to the attack, and the refinery in Sloviansk-on-Kuban partially stopped work.

At the end of March, a sharp decrease in gasoline production was recorded in Russia — by 7.4%, to 754.6 thousand tons. Politico wrote that drone attacks on Russian oil refineries led to the fact that one of the worldʼs largest oil powers ran out of gasoline.

In May, strikes on Russia stopped 14% of its oil refining capacity.

For more news and in-depth stories from Ukraine please follow us on X.