Russia’s oil refining could hit new multi-year low in August as recovery slips further away

Russia's oil refining sector is facing significant challenges, with output projected to plunge to a new multi-year low in August, according to Russian reports and market estimates. The decline is primarily due to damage from Ukrainian drone strikes, causing unplanned repairs and outages. Oil processing volumes at Russian refineries could drop to around 4 million barrels a day in August, a decrease of nearly 5% from July and 2.5% from June.

This would represent a significant setback, as the industry had not seen such low levels since the early 2010s or even earlier. Experts do not anticipate a return to normal output levels this year, despite possible increases in September due to capacity restoration. Authorities in some regions have also introduced new fuel sales restrictions.

The critical minimum for Russian refining, which is essential to keep the domestic market supplied with fuel, is estimated to be between 3.3 and 3.5 million barrels a day. To stabilize the market, the Russian government has extended a reduced gasoline sales quota until the end of 2026 and allowed the production, import, and sale of certain fuel types through 2027.

Fuel shortages stemming from the drone strikes have impacted at least 16 regions in Russia. In response, the country has started importing gasoline from India, Kazakhstan, and Morocco. The fuel crisis has also had a negative impact on Russian President Vladimir Putin's approval rating, which fell by a record 5 percentage points to 66%, its lowest level in nearly four years.