Ukraine Continues to Strike Russian Oil Refineries, Prominent Commodity Trader CEO Speaks Out! What Impact Will the Oil Market Face?

Swedish commodity trader Gunvor Group CEO Torbjörn Törnqvist estimates that Ukraine's drone attacks have cost Russia approximately 600,000 barrels per day of refining capacity.

Over the weekend, drone strikes hit several Russian oil refineries, some located within Russia, leading to diesel futures rising for the fourth consecutive trading day and gasoline futures climbing for the sixth consecutive trading day.

"This is significant because it will obviously directly hit the export of distillates such as diesel and kerosene," Törnqvist said on Monday at the S&P Global CERAWeek conference in Houston. "So, this could reduce exports by several hundred thousand barrels, and in my view, this is a distillate issue."

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Prior to the outbreak of the Russia-Ukraine conflict, Gunvor was a major trader of Russian oil, but it exited this trade shortly after the conflict began.

Meanwhile, J.P. Morgan estimates that Ukraine's attacks have shut down about 900,000 barrels per day of Russian refining capacity. Analysts, including Natasha Kaneva, said in a report that capacity recovery could take "weeks, or even months," and Ukraine's attacks have added a risk premium of about $4 per barrel to global crude oil prices.

Foreign media reported that on Tuesday and Wednesday last week, the facility damage caused by Ukrainian airstrikes accounted for more than 10% of Russia's oil processing capacity.

On Tuesday last week, Lukoil's Norsi refinery and an oil depot in the Oryol region also caught fire after being attacked by drones. On Wednesday last week, a Ukrainian drone attacked one of Russia's largest oil refineries, the Ryazan refinery of Rosneft, located about 200 kilometers southeast of Moscow. The refinery caught fire due to the attack, with an annual capacity of 17.1 million tons, or about 340,000 barrels per day, and is a major supplier of automotive fuel for the area surrounding Russia's capital.

Since the beginning of this year, Ukraine has been using drones to target key Russian oil processing plants from the Black Sea to the Baltic Sea. As the front-line battles have been developing in favor of Russia, Ukraine has been trying to hinder Russia's oil product exports and its ability to supply fuel to its troops.

A series of attacks by Ukraine in February affected nearly one-fifth of Russia's crude oil processing capacity, but by early March, the industry had begun to recover.Törnqvist stated that, overall, the crude oil market is fundamentally in a balanced and reasonably valued state, adding that the growth rate of supply in the United States this year may only be about half of the 700,000 to 800,000 barrels per day expected in 2023. However, he indicated that the overall supply growth from non-OPEC countries this year may remain flat.

Gunvor, co-founded by Törnqvist in 2000, recently purchased liquefied natural gas tankers and anticipates that shipping will become a significant driver of the company's growth in the coming years.