Energy Market Bad News! Russian Oil Export Hub Hit by Successive Attacks, Oil Export Capacity Paralyzed by 40%?

According to industry experts based on market data, due to Ukraine drone attacks on Russia’s oil export ports, the destruction of a major oil pipeline, and the detention of some oil tankers, Russia’s at least 40% of its oil export capacity may have stalled. This will undoubtedly bring new bad news to the energy market, which is already troubled by Middle Eastern conflicts.

Russia’s two major oil shipping ports in the Baltic Sea—Primorsk and Ust-Luga—were attacked by Ukrainian drones between the night of the 22nd and early morning of the 23rd. The attacks caused fires, and smoke was visible even from across the border in Finland.

Sources say both ports suspended crude oil and petroleum product loading on Wednesday. These drone attacks on Russian Baltic ports are among the largest in Ukraine’s four-year conflict with Russia, potentially increasing uncertainty in the global oil market due to Middle Eastern tensions.

Both ports are located in Leningrad Oblast in northwest Russia, about 80 kilometers apart. According to Leningrad Governor Alexander Drozdenko on the 23rd, Russia’s air defense systems intercepted over 70 Ukrainian drones entering the region’s airspace between the night of the 22nd and early morning of the 23rd. The attack caused several fuel tanks at Primorsk to catch fire.

Finnish Coast Guard officer Jukka-Pekka Lumilahti said Wednesday that the fire at Primorsk has not been fully extinguished. “The fire is still burning almost as intensely as when it started,” he said. “It’s a major fire with thick smoke on the scene.”

Finnish Parliament member and Defense Committee Chairman Heikki Autto noted that when he landed at Helsinki Airport on Tuesday, he saw a huge column of black smoke rising from the direction of Primorsk.

Recently, as Washington-mediated peace talks have stalled, Ukraine has increased drone attacks on Russian refineries and export routes to weaken Russia’s economy.

Earlier this week, Ukraine’s Security Service (SBU) announced that its drones successfully hit the Ust-Luga port. “The attack damaged oil loading racks and storage tanks for crude oil and petroleum products,” the SBU said, adding that such attacks aim to reduce Russia’s foreign exchange income.

Could Russia’s oil export capacity have already dropped by 40%?

It is reported that Primorsk is Russia’s main export terminal for Ural crude oil and high-quality diesel, handling over 1 million barrels of exports daily. Sources say that last year, Ust-Luga exported a total of 32.9 million tons of oil products, and Primorsk exported 16.8 million tons.

Industry estimates suggest that after this week’s attacks, about 40% of Russia’s crude oil export capacity (around 2 million barrels per day) has been halted as of Wednesday.

This estimate includes Primorsk, Ust-Luga, and the “Friendship” pipeline running through Ukraine to Hungary and Slovakia.

Ukraine has also previously attacked pump stations and refineries on Russian oil pipelines. Since early this month, the Novozyisk oil terminal (with a processing capacity of up to 700,000 barrels per day) has been damaged by Ukrainian drone strikes, resulting in lower-than-expected loading volumes.

Additionally, traders say frequent detention of Russian-related oil tankers in Europe has blocked the flow of 300,000 barrels per day of Arctic crude from the Murmansk port.

Russia’s oil exports are a major source of government revenue and a core pillar of its $2.6 trillion economy. Despite recent Middle Eastern conflicts causing oil and gas prices to surge, which could benefit Russia’s energy exports, if the current severe export capacity restrictions are not resolved, high oil prices’ benefits may slip away.

Traders say that as Western export routes are blocked, Moscow will have to rely on exporting oil to Asian markets, but transportation capacity limits these routes’ volumes.