Russian oil product exports slump to post-pandemic low as drone hits resume

Russian oil product exports slumped to a post-pandemic low in April, according to tanker tracking data, as Moscow battles to repair its Western refineries which remain under siege from Ukrainian drones.

Seaborne Russian export loadings of diesel, fuel oil, naphtha and other refined products picked up slightly in the second half of April to average 1.94 million b/d, according to S&P Global Commodities at Sea. The April average marks a 360,000-b/d slump on March and almost 700,000 b/d below January levels when Ukraine began a barrage of long-range drone strikes on Russian refining capacity. Flooding also took the 116,000-b/d Orsk refinery offline for two weeks during the month.

The last time Russian product exports fell below 2 million b/d was during the peak of COVID-19 lockdowns in mid-2020.

After a three-week hiatus, Ukraine launched one of its largest drone strikes to date on April 27, when 66 drones were downed over Russia's Krasnodar region, according to Russia's defense ministry, leaving both its Ilsky and Slavyansk refineries damaged. On April 30, a fire broke out at Russia's 342,000 b/d Ryazan refinery after a new drone strike on the facility.

Some 600,000 b/d of refining capacity currently remains offline as Russia rushes to repair damaged units, according to S&P Global Commodity Insights estimates, down from more than 1 million b/d last month.

Russia's biggest fuel exports -- diesel and gasoil -- averaged 737,000 b/d in April, down 137,000 b/d from the previous month and 240,000 b/d since January, the data showed. Russia's April oil product export slump was led by fuel oil, however, which shrank 147,000 b/d on the month and 220,000 b/d since January. Exports of naphtha, gasoline and VGO were down by 72,000 b/d, 58,000 b/d and 61,000 b/d on March respectively.

Market reaction

With Russia appearing adept at quickly restoring damaged capacity and boosting crude runs at plants unaffected by attacks, some market watchers have lowered expectations of potential supply shocks from the export impact. Russia has also been scrambling to plug any regional fuel supply shortage by prioritizing shipments of oil products via rail, according to local reports.

Across the Atlantic Basin, diesel cracks continue moving downward as refinery outages eased and stock levels sufficient to cover muted demand offset the impact of lower Russian exports.

ICE low sulfur gasoil futures have proved largely unresponsive to resumed attacks, and have now dropped 10% since their April 5 peak, according to assessments by Platts, part of S&P Global. Diesel crack spreads versus Dated Brent in Rotterdam stood below $16/b on May 1, down from $18.50/b in April and $31/b in February.

"The Russian oil industry has once again proven its resilience, taking an average time of just three weeks to restart the drone-hit refineries," oil analysts at S&P Global said in a recent note "...Nevertheless, a fast-growing indigenous drone industry and the increased range of Ukrainian drones will remain a threat to Russian energy infrastructure. We expect Russian refined product exports to remain weak in May and gradually return to normal if there are no further attacks."

Exports to India jump

The latest tanker data showed that Russia's seaborne crude loadings have risen over the last two months, possibly as additional crude is backed out to ports depending on whether the damaged refineries are linked to domestic fuel supply or export infrastructure.

Seaborne crude flows in April averaged 3.84 million b/d, the data showed, little changed from 3.82 million b/d in March but up from average levels of 3.5 million b/d over the last year.

The data showed Russian crude exports to India surged to an 11-month high of almost 2 million b/d in April, marking a 350,000 b/d jump on the month. India's imports of Russian crude fell to 1.3 million b/d in November due to a currency payment dispute with Moscow and tighter enforcement of Western sanctions on Russian oil, which led to Indian refiners shunning Russia's Sovcomflot tanker fleet.

With exports to India soaring, Russian crude flows to China shrank by almost 200,000 b/d on the month to 1.14 million b/d, the data showed. Flows to Turkey -- Moscow's third biggest crude buyer -- slipped by 70,000 b/d to 312,000 b/d.

Meanwhile, Russian oil on water has retreated from record highs in recent weeks despite support from longer voyages for products around the Cape of Good Hope to avoid ongoing threats to shipping in the Red Sea.

As of May 2, more than 190 million barrels of Russian crude and oil products were at sea, according to CAS, down from a recent high of 216 million barrels in late February. Of the total, crude stood at 119 million barrels with products making up the remaining 74 million b/d.