As U.S. sanctions target crude exports, special-purpose Russian oil refineries are on the rise.
MOSCOW (Reuters) – Russian oil refiners are producing more crude after new U.S. sanctions on Russian tankers and traders make it more difficult to export unproduced crude, data showed.
In the year Starting in 2022, Russia is trying to adapt to Western sanctions imposed in response to its invasion of Ukraine by buying new ships, redirecting oil exports from Europe to Asia and finding new oil customers in Africa and Latin America.
The latest U.S. sanctions on Russia’s oil industry in January have made crude exports more expensive and complicated for key Asian customers in India and China.
Russian refining runs rose by 2%, or 108,000 barrels, to 754,800 metric tons a day from January 15-19, the first week of the year, sources said.
In January 2024, it increased by 1.2 percent from the average.
The sources asked not to be named because they were not authorized to speak publicly.
Compared to the price ceiling for G7 crude oil, Russia has a slightly wider range of options for oil exports.
Under the cap, Moscow can use Western ships and shipping services if it can sell crude below $60 a barrel and diesel below $100.
A price of $60 per barrel is lower than the current price of Russian flagship Urals crude, which is around $70 per barrel.
Traders say the current price ceiling on crude-to-crude prices – $100 a barrel – still leaves room for profit. Russian diesel currently sells for $75 per barrel.
They also note that the ship’s supply is higher for oil than for crude.
Ships
Russia’s efforts to boost sanctions have been complicated by Ukraine’s drone strikes and a overheating economy.
Russia’s top oil producer Rosneft also said it may have to abandon plans to upgrade refineries.
Still, sources say Russian refineries are producing as much as they can, betting on their chances of finding oil export ships after the crude tankers are abandoned.
“We have to use as much oil processing as we can to use the block oil,” said one industry source.
The sanctions, announced by the Biden administration in early January before new US President Donald Trump took office, target 180 tankers involved in the transportation of mostly Russian oil and very low volumes of crude oil.
In the year By 2024, those tankers will carry about 1.5 million barrels of crude oil per day and just 200,000 barrels per day of refined products, according to a Morgan Stanley analysis.
The sanctions also targeted Russian oil companies Surgutneftegaz and Gazprom Neft.