Reuters: Russian refineries cut output amid losses, closures possible

At least three Russian oil refineries have reduced or halted production due to mounting losses driven by export restrictions, rising crude prices, and high borrowing costs, Reuters reported, citing informed sources.

The affected refineries – Tuapse, Ilsky, and Novoshakhtinsky – have either paused operations or scaled back production in recent months. These closures highlight the challenges facing Russia's oil refining sector, which is grappling with Ukrainian drone strikes, Western sanctions, and high-interest rates.

Less advanced refineries, producing non-premium fuels, have suffered the most, with losses reaching up to 10,000 rubles ($102) per metric ton in the latter half of 2024. More advanced facilities have either operated with minor losses or managed modest profits from light oil product sales.

State-owned Rosneft, Russia's largest oil company, was forced to repeatedly suspend operations at its Tuapse refinery on the Black Sea this year due to low profitability. Meanwhile, the Ilsky and Novoshakhtinsky refineries in southern Russia have been operating at half capacity for months, processing approximately 70,000 and 60,000 barrels per day, respectively.

All three facilities were targeted by Ukrainian drone strikes earlier this year, contributing to reduced output.

"We expect that the actual (plant) closures may take place at the beginning of next year," a source told Reuters.

The crisis has lowered fuel exports and company revenues, cutting state budget inflows amid high inflation and energy market uncertainties, further aggravated by weak demand.