Russia's crude oil exports reached a record average of 4.13 million barrels per day in the four weeks leading up to June 28, the highest since the 2022 invasion of Ukraine. This surge in shipments has led to a significant accumulation of Russian oil at sea, increasing by approximately one-third from mid-April lows, with cargoes building up near locations such as Egypt and Singapore. This suggests that Russia is facing increasing difficulty in offloading all its exported oil, contributing to tumbling prices for its crude.
The heightened export volumes are occurring despite internal challenges, particularly ongoing Ukrainian drone attacks on Russian oil infrastructure. These attacks have severely impacted Russia's refining capacity, forcing the country to export more crude rather than process it domestically. For instance, in July, Russian refineries processed an average of 3.91 million barrels of crude per day, the lowest figure since March 2005 and more than $1.4 million barrels per day below the average for July last year. Analysts have suggested that Ukrainian strikes may have reduced Russia's refining capacity by 20-40%.
This situation presents a complex scenario for Russia, as it funnels a record amount of crude into the global market to compensate for reduced domestic processing capabilities. While this helps keep the world supplied with oil amid disruptions elsewhere, the oversupply of Russian crude is driving down prices, impacting Moscow's revenue. The reliance on sea shipments has also increased significantly since the war, as a much greater proportion of oil was previously transported via pipelines to Western Europe.
