Russian refineries reduced refining in January

Russian refineries in January reduced refining by 4% compared to the same period last year and by 1.4% compared to December. The main factors behind the decline were repairs, as well as the breakdown of some installations due to increased drone attacks. Among large oil companies, Gazprom Neft, Surgutneftegaz and Rosneft-controlled Bashneft managed to increase oil refining.

Russian oil companies in January 2024 reduced primary oil refining by almost 4% compared to the same month last year, to 747.9 thousand tons per day (b/d), sources familiar with industry statistics tell Kommersant. Compared to December 2023, processing decreased by 1.4%. In total, oil workers processed about 23.18 million tons of oil in January.

Rosneft (excluding Bashneft, which it controls, and 50% in the Yaroslavl Oil Refinery) in January reduced oil refining by 10% compared to a year earlier, to about 170 thousand tons per day. This is mainly due to the suspension of the Tuapse refinery after a drone attack, as a result of which it processed 30% less oil. Refining at Bashneft plants, on the contrary, increased by 13%, to 40 thousand tons per day.

LUKOIL reduced oil refining by almost 8%, to 115 thousand tons per day. This is mainly due to repairs at the Nizhny Novgorod refinery, which reduced capacity due to accidents at the installations. As a result, it processed 16% less oil than in January 2023 (more than 36 thousand tons per day). “The enterprise is assessing technical solutions for restoration, assessing the possibility of quickly restoring equipment; this will determine how long it will take. The minimum is still somewhere around one to one and a half months,” Deputy Prime Minister Alexander Novak said at the end of January. In February, refining may likely be slightly reduced at LUKOIL’s Volgograd refinery, which was attacked by a drone last week.

Gazprom Neft, which owns the Omsk and Moscow refineries, increased refining (excluding 50% at the Yaroslavl refinery) by 3%, to 89 thousand tons per day. Surgutneftegaz increased production by 7%, to 53 thousand tons per day.

The decrease in refining volume is partly due to Russia’s obligations under agreements with Saudi Arabia to reduce oil production. As Deputy Prime Minister Alexander Novak explained, Russia is limiting the export of oil and petroleum products in the first quarter by 500 thousand barrels per day, this level was already reached in January.

It would make sense for oil companies to produce more petroleum products for sale on the domestic market or abroad, rather than sell Urals oil, says Boris Sinitsyn, an independent analyst in the natural resources sector. He notes that at the end of January, the discount for Russian oil products to world benchmarks was slightly lower than for Russian oil.

The main repair campaign at the refinery starts in March. At this point, the repair period coincides with a seasonal increase in fuel demand, which usually leads to higher prices. In general, in 2024, the repair campaign at factories is expected to be less large-scale than last year, however, Western sanctions complicate the supply of some components, which may lead to delays in repairs.

A decrease in oil refining and fuel production in January (see Kommersant on February 5) increased wholesale fuel prices, but after regulators threatened to punish speculators, prices decreased slightly. On February 5, gasoline rose in price again on the St. Petersburg MSTB exchange: the cost of AI-92 and AI-95 increased by 1.3% and 0.2%, to 46.3 thousand and 53.5 thousand rubles. per ton. On February 8, the current situation in the fuel market will be discussed at a meeting with Deputy Prime Minister Alexander Novak.

Dmitry Kozlov