Product Glut to Hit Russian Refiners Hard

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Russia’s refining industry, the world’s third largest, is walking into a nightmare. Approximately half of its 5.6 million barrel per day output is exported, but Europe, the primary market, is now balking at new cargoes. The US, a small but important offtaker, has banned all imports of Russian products. There are no alternate routes for exporting such large volumes, storage capacity is limited and domestic consumption will fall as the economy enters recession. That means Russia’s vertically integrated oil companies, which control about 85% of its refining capacity, will have to reduce runs and perhaps even shut some facilities until there is a conflict resolution in Ukraine. April will reveal the extent of the crisis, but March throughput is already showing how companies are bracing for a rough ride. Throughput declined 8% in the Mar. 1-16 period to 5.43 million b/d compared to February. Although this is partly due to the start of maintenance season, the reduced runs are expected to accelerate as exports diminish. Industry insiders claim that a few of Rosneft’s refineries, infamous for an abundance of dirty products in their slate, will shut multiple primary distillation units in April.

Refining, Oil Products, Diesel/Gasoil
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