The closure of Russia’s Baltic port of Ust-Luga following a drone attack on Wednesday could force major refineries in the European part of the country to cut crude runs due to shipping constraints, two market sources said. According to sources and social media reports, the strike damaged a rail unloading rack for petroleum products at the Ust-Luga terminal.
The Ust-Luga export bottleneck puts at risk oil processing at four of the biggest refineries in the European part of Russia - in Kirishi, Yaroslavl, Moscow and Ryazan. In total they process around 55 million tonnes of crude oil per year (400,000 barrels per day), according to traders.
The Ust-Luga oil terminal on Wednesday stopped discharging rail cargoes, including supplies from these four big refineries. Ust-Luga, one of Russia’s export hubs for refined products, handles about 18 million tonnes of fuel oil annually, traders estimate.
"Ust-Luga stopped taking gasoline and fuel oil on Wednesday. Within days we will have to cut runs to minimum levels and then potentially shut units," a refinery specialist said. All the sources spoke on condition of anonymity because they were not authorised to speak publicly on the issue.
Disruptions of fuel oil export shipments pose the biggest challenge for refiners, the sources said. While gasoline and diesel can be sold domestically, the domestic market has limited demand for fuel oil, which accounts for 18 per cent–35 per cent of crude runs at all the refineries affected.
Lowering runs to curb fuel oil output would also limit gasoline production at a time of seasonal demand increase. Refiners are considering emergency measures. It is unclear when operations will resume at Ust-Luga.
"Fuel oil is the bottleneck product. We are calculating how to minimise dark yields, divert into bitumen, bunker fuel, also look at other ports, cut runs and load secondary units to the maximum (fuel oil utilisation)", a refinery source said.
Also on Wednesday, Kirishi refinery was hit by a drone attack and may cut processing, which could ease the transshipment capacity shortage, as less fuel oil will be produced.
(Reporting by Reuters, editing by Barbara Lewis)