Russia diesel exports slump as Ukraine drone strikes hit oil infrastructure

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Russia diesel exports slump on drone strikes

Highlights

Ukraine's escalated drone attacks drove Russian refinery strikes up to 31 in July from 11 in January, slashing diesel exports over 75% year-on-year to 141,000 barrels per day in September.
The Trump-Putin diesel arrangement resumed Russian exports at just 75,000 barrels per day in October and 124,000 barrels per day in November, well below market demand.
Global diesel exports have dropped 1 million barrels per day from losses in Russia and the Middle East, raising U.S. diesel prices to $6.32 per gallon, nearly 75% higher year-on-year.

Drone campaign disrupts export recovery

As reported by CNBC, Ukraine is launching larger and deeper drone assaults on Russian refineries, storage sites and export facilities after ending its brief adherence to the energy ceasefire that President Donald Trump declared on Oct. 11. State media reports say more than 1,000 Ukrainian drones target Russia on Sunday alone, and one of the strikes sets an oil export terminal in St. Petersburg on fire.

Analysts say the attacks are damaging Russia's ability to return diesel volumes to the global market. Tatiana Mitrova, an expert on the Russian oil industry at Columbia University's Center on Global Energy Policy, says the scale, range and effectiveness of the strikes have crippled Russian diesel exports, while Kpler's Matt Smith says Trump's arrangement with President Vladimir Putin to increase shipments is likely no longer workable without an energy ceasefire.

Data cited in the report show refinery and oil infrastructure strikes rise to 31 in July from 11 in January, according to Rochan Consulting. Kpler data show Russia's diesel exports fall more than 75% to 141,000 barrels per day in September from 608,000 barrels per day in the same period last year.

Moscow bans exports in July to protect domestic supply and resumes shipments this month under the Trump-Putin diesel arrangement. Under that plan, the Kremlin agrees to supply about 75,000 barrels per day in October and 124,000 barrels per day in November, though Mitrova says those volumes are minimal relative to total market demand.

Ukraine is also expanding the reach and precision of its attacks. In July, Kyiv hits Russia's largest refinery at Omsk, deep in Siberia near the Kazakhstan border, and analysts say Ukrainian forces are increasingly targeting more complex refining units that are harder to replace than damaged fuel tanks.

Global fuel market faces prolonged strain

The export losses from Russia are adding to disruption from the Middle East, where the diesel market is already under pressure after Trump's decision to go to war with Iran in late February. Attacks on tankers in the Strait of Hormuz and strikes by Iran-backed Houthis on oil infrastructure used by U.S. Gulf Arab allies are also reducing fuel flows, according to the report.

Smith says diesel exports through Hormuz are down about 540,000 barrels per day from last year, while global diesel exports have fallen about 1 million barrels per day because of lost supplies from Russia and the Middle East combined. That tightening is feeding into retail prices in the U.S., where AAA data show diesel averages $6.32 per gallon on Tuesday, nearly 75% above the same period last year.

With the U.S. midterm elections less than two weeks away, Trump is blaming Ukraine for rising diesel prices that he says are hurting Republican prospects. But the broader market problem is limited refining capacity after damage caused by two wars, and U.S. refiners are already running at maximum capacity to cover part of the shortfall.

The International Energy Agency warns this month that diesel supplies are likely to remain constrained well into 2027. Smith says the current tightness is likely to persist in the coming months, keeping prices elevated.

In our earlier article on the surge in crude oil shipping costs, we examined how conflict-driven risks in routes such as the Strait of Hormuz and the Red Sea sharply lifted tanker and insurance rates. We also noted that these higher transport costs can feed through into pump prices and broader consumer inflation, especially for import-dependent markets, as companies reroute cargoes and pay growing risk premiums.

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