International Energy Agency backs US stance on Ukrainian drone strikes on Russian refineries

The International Energy Agency (IEA), following the United States, has stated that attacks by Ukrainian drones on Russian oil refineries risk destabilising global oil markets.

Source: Bloomberg

Details: Ukrainian drones have intensified attacks on Russia's oil industry since the beginning of the year, aiming to disrupt fuel supplies to the military and limit the Kremlin's revenue. The IEA’s monthly report indicates that approximately 500,000 to 600,000 barrels per day of the country's crude oil processing capacity could be lost in this quarter on a gross basis without compensation.

The shutdown of damaged oil refineries or units for four to eight weeks for repairs "could mean a significant loss" of Russian petroleum product exports, the Paris-based agency said on Friday. 

Quote: "International markets rely on Russian exports of diesel, naphtha and jet fuel, while refining systems in Asia absorb substantial quantities of the country’s straight-run and cracked residue to boost upgrading unit feedstocks," Bloomberg wrote.

The IEA effectively echoed a statement by US Defense Secretary Lloyd Austin, who warned that Ukrainian attacks "could have a knock-on effect" on the global energy market.

So far, the actual decline in oil refinery output has been much less. The IEA data shows that official weekly data on Russian refineries through the end of March matched crude oil production volumes of 5.0 to 5.2 million barrels per day, not the 4.6 million barrels per day indicated by an upper estimate of refinery outages.

Russian refiners processed an average of 5.25 million barrels per day in the first three days of April. Bloomberg calculations based on historical data show that despite the recovery since mid-March, daily refining volumes remain significantly below the 5.78 million barrels of crude processed in the first few days of April last year.

Background: The United States of America has requested that Ukraine cease attacks on Russian oil refineries, as it could result in a hike in global oil prices and provoke "retaliation" from Russia.

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