The United States has repeatedly urged Ukraine to halt its drone attacks on Russian oil refineries due to Washington’s assessment that the strikes could led to Russian retaliation and push up global oil prices, the Financial Times reported on Friday, citing sources familiar with the exchange.
The White House has been urging Ukraine’s military intelligence and state security service to reconsider the drone attacks, which have intensified in recent weeks, according to FT’s sources.
The attacks have reduced Russia’s refining capacity and driven oil prices higher this month. Early on Friday, Brent Crude prices traded at above $85 per barrel, while the U.S. benchmark, WTI Crude, was at $81 per barrel, which is set to further raise U.S. gasoline prices amid rising demand, refinery maintenance, and falling stocks.
With gasoline demand rising, U.S. gasoline prices increased last week for a third week in a row, GasBuddy data showed earlier this week.
This doesn’t look good at all for the U.S. Administration in an election year in which President Joe Biden is expected to seek re-election in November.
Ukrainian drone attacks on Russian refineries in recent weeks have taken out as much as 600,000 barrels in daily processing capacity in Russia, according to commodity trading major Gunvor.
“It is significant because obviously this is gonna hit the distillate exports straight away,” Gunvor chief executive Torbjörn Törnqvist told Bloomberg on the sidelines of CERAWeek.
“So that will probably take down exports by a couple of hundred thousand barrels, so to me it’s a distillate problem,” the executive added.
Lower refining capacity in the second quarter, due to refinery maintenance and emergency repairs following the attacks, could be one of the reasons why Russia said it would focus on cuts to oil production instead of exports in its voluntary supply reduction as part of OPEC+ in the second quarter, analysts say.
By Charles Kennedy for Oilprice.com
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