War damage to Middle Eastern refineries and Ukrainian drone strikes on Russian plants are squeezing global fuel supplies. Russia is repairing its refineries, but the danger of fresh attacks remains. Oilprice.com's Irina Slav argues the refinery shortage is not easy to solve by building more or running existing plants harder.
Refineries have become prime targets as the fuel shortage worsens. Many refineries in the Gulf were damaged in the war between the U.S. and Israel, and Iran, and output from one of the biggest refining regions is not going to return soon.
Houthis claim a hit on Ras Tanura
The Yemeni Houthis claimed responsibility for an attack on the Ras Tanura refinery, which has a capacity of 550,000 barrels daily. Saudi authorities have not confirmed the hit.
That attack adds to damage that Iranian retaliatory strikes already did to Gulf refineries after U.S. and Israeli attacks earlier this year. Iran has repeatedly warned that its Gulf neighbors are targets because they host U.S. military bases.
Ukrainian drones cut Russian capacity
Ukraine has launched more than 100 drone attacks on Russian refineries over the past few months. According to a Wall Street Journal report, some 30 refineries were targeted, representing 80% of Russia's total refining capacity. Industrial Info Resources estimates that the damaged refineries' combined capacity has fallen from 6.1 million barrels daily to 1.6 million barrels daily.
Russia then banned diesel exports and curbed gasoline exports, which aggravated the global supply situation and led to all-time high prices for diesel. President Trump's answer was a deal with Russia's president for 300,000 tons of diesel next month. Analysts question the significance of that volume, which equals 75,000 barrels daily.
Repairs help, but risks remain
Reuters reported that Russian refining rates rose by 25% between the start of October and the second half of the month, to some 5 million barrels daily, citing unnamed industry sources. Deputy Prime Minister Alexander Novak attributed the ramp-up to repairs made with locally manufactured equipment.
Still, a return to normal is a different matter. Trump threatened to restart hostilities against Iran after the midterm elections on November 3. The Wall Street Journal reported that Washington warned Gulf allies to prepare for a short, intense campaign. Iran would then retaliate, and refineries in the region would be among the obvious targets.
The International Energy Agency's Fatih Birol warned that crude oil and natural gas prices will stay elevated next year, and that product prices are even higher.
Source: Oilprice.com
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