Tanker Market: Russian Fuel System in Limbo

    In its latest weekly report, shipbroker Intermodal said that “as the war in Ukraine extends into its fifth year, one of its most significant market consequences is emerging not on the battlefield, but in Russia’s fuel system. Repeated attacks on refinery infrastructure have deepened domestic shortages and reduced Russia’s ability to process crude. Yet the result is not a broad decline in Russian oil flows. It is a shift in composition: more crude being pushed into seaborne exports, particularly through western ports, and fewer refined products available for domestic use or export. Moscow’s request to Kazakhstan for gasoline supplies underlines the pressure on Russia’s downstream system. For shipping markets, that distinction matters more than the headline export number, because crude and product tankers are exposed to opposite sides of the disruption”.      According to Intermodal’s Senior Analyst, Mr. Nikos Tagoulis, “according to LSEG data, Russia’s crude oil exports rose by 7.8% year on year in June, supported by stronger shipments to India and a corresponding increase in ton-mile demand. On the surface, this points to a firmer crude export programme, particularly from western ports such as Primorsk, Ust-Luga and Novorossiysk. The underlying driver, however, appears less constructive. Higher crude exports are being supported not by a stronger Russian oil balance, but by reduced domestic processing capacity”. “The pressure is increasingly visible inside Russia’s domestic fuel market. By late June, at least 55 of Russia’s 83 federal entities were reportedly facing some form of fuel restriction, meaning that more than two-thirds of Russia’s administrative regions were experiencing constrained access to gasoline and diesel. The disruption reflects the cumulative impact of Ukrainian drone strikes on downstream infrastructure. Since March, more than two dozen attacks have reportedly hit eight of Russia’s ten largest refineries, taking around 20% of total refining capacity offline. The effect is also visible in export flows: Russian fuel oil exports declined by 17% year on year in Q2 2026, underlining the extent to which refinery outages are reducing product availability both domestically and in the seaborne market”, Intermodal’s analyst said.   “The implication is clear: refinery outages are altering the composition of Russian oil flows. Crude that cannot be processed domestically must either be stored or sold overseas. With Moscow seeking to maintain production levels and secure export revenues, more of these barrels are being redirected into the seaborne crude market, even as refined product availability weakens. This changing flow pattern creates a clear divergence between crude and product tankers. For crude carriers, the disruption is broadly supportive. Higher shipments from Russia’s western ports are increasing liftings from the Baltic and Black Sea, providing additional employment for Aframax and Suezmax vessels. Refinery damage can therefore support crude tanker demand indirectly, not because Russia’s oil system is healthier, but because more crude is being forced into export channels”, Mr. Tagoulis said.   He added that “product tankers face the opposite dynamic. Lower output of diesel, gasoline and jet fuel reduces the availability of clean cargoes from Russian ports, limiting enquiries and weighing on product tanker demand. If fuel export restrictions are extended or tightened, the negative impact on product tanker stems could become more direct. The risk premium around Russian-linked trades is also elevated. Ukrainian attacks have not been limited to refineries, but have also affected port, storage and tanker-related infrastructure. This makes loading schedules less reliable and adds insurance, compliance and security concerns. Some owners may become less willing to call at western Russian ports, reducing the pool of available tonnage and increasing fixing complexity”.      Mr. Tagoulis concluded that “the key takeaway is that elevated Russian crude exports should be interpreted with caution, as they may reflect constraints within Russia’s refining system rather than a stronger underlying oil balance. In this case, they point to a constrained refining system that is pushing more crude into seaborne exports while reducing Russia’s ability to supply refined products. For the wet segment, this disruption-driven shift in flows is therefore supportive for crude carriers and negative for product tankers, while also creating heightened operational risk and uncertainty across both segments”.