Yuriy Kobzar19:27, 11/15/24

Ukrainian drone strikes, the devaluation of the ruble and the drop in world prices for finished fuel have made Russian refineries unprofitable.

A number of Russian oil refineries were forced to stop work due to unprofitability amid rising crude oil prices and Ukrainian drone strikes. Reuters writes about this with reference to its own sources in the industry.

Five sources at companies that run Russian refineries say three plants – Tuapsyn, Ilski and Novosakhtyn – have suspended or reduced production in recent months.

“The closures underscore the struggles of Russia’s oil refining industry, which has come under fire from Ukrainian drone attacks, Western sanctions against Russia that force refiners to sell fuel at a discount, and high interest rates,” the publication said.

Those oil refineries that have the least modern processing technology have suffered the most. Unable to produce more expensive premium fuel, they have lost an average of up to 10,000 rubles ($102) on each tonne of oil in recent months.

Some more modern refineries also operated at small losses, while others posted very modest profits, the sources said.

The problem was the rise in domestic Russian oil prices due to the gradual devaluation of the ruble. In order to maintain profitability, oil refiners need to buy oil at 35,000 rubles per ton, while it is currently sold at a price of 50,000 rubles. At the same time, finished fuel is becoming cheaper on world markets, where Russia sells a significant part of what is produced.

At the same time, Russian oil refiners cannot simply wait out the difficult times with loans, as the Central Bank of Russia raised the key interest rate to 21% in an attempt to curb inflation. This made credit unavailable to almost any legitimate business.

(C)UNIAN 2024