Russian Oil Refining Increases Amid New U.S. Sanctions

In response to recent U.S. sanctions targeting crude exports, Russian refineries are ramping up processing in an effort to boost fuel exports. According to industry sources, refining runs rose by 2% during mid-January, amounting to 754,800 metric tons per day—an increase of 108,000 barrels compared to the beginning of the month.

The U.S. sanctions, which target about 180 tankers associated with transporting Russian oil, have complicated crude exports to key Asian markets, including India and China. These sanctions, imposed in early January, add complexity and cost to Russian oil trade, prompting the nation to adapt by seeking new markets in Asia, Africa, and Latin America.

Despite the challenges, Russian refineries are striving to utilize their processing capabilities fully. Notably, Surgutneftegaz's Kirishi oil refinery reported an almost 8% increase in oil processing during the first three weeks of January compared to the last weeks of December.

The sanctions include a G7 price cap that allows Russia to use Western shipping services for crude sold below $60 per barrel and diesel under $100 per barrel. However, the flagship Urals blend is currently priced at about $70, making profits on crude exports more difficult.

As Russian refineries focus on fuel production, they face ongoing challenges, including interference from Ukrainian drone attacks and an overheating domestic economy. Nevertheless, industry officials express confidence in their ability to adapt and find export opportunities despite the hurdles.