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Ukrainian strikes on Russian refineries cause reduction in exports from Russia

Ukrainian strikes on Russian refineries cause reduction in exports from Russia Photo: World oil prices have risen due to Ukrainian drone strikes on refineries in Russia (Getty Images)
Author: Liliana Oleniak

World oil prices rose on Monday, February 5, after a sharp drop last week. Oil is rising in price as Washington vowed to launch further strikes against Iranian-backed groups in the Middle East and Ukrainian drones struck a major oil refinery in southern Russia, according to Reuters.

Brent crude oil futures rose 0.5% to $77.7 per barrel, while US WTI futures were trading at $72.5 per barrel, up 0.4%. Both benchmark indices ended last week down about 7%.

Investors remain wary of any escalation in the Middle East conflict after the U.S. signaled further strikes against Iranian-backed groups in the Middle East in response to a deadly attack on U.S. troops in Jordan.

U.S. strikes on terrorists in Middle East

The United States also continued its campaign against Iranian-backed Houthis in Yemen, launching 36 strikes on Saturday against groups whose attacks on transport vessels have disrupted global oil trade routes, although supplies have been largely unaffected.

"Given the U.S. military strikes avoid directly attacking Iran, we think the Israel‑Hamas ceasefire talks will have the more dominant effect ‑ thereby reducing Middle‑East tensions," says Vivek Dhar, commodities analyst at the Commonwealth Bank.

"Oil markets will likely respond by continuing to discount supply disruption risks in the Middle East," he says, adding that would likely keep Brent futures below $80 a barrel.

On Friday, the U.S. Department of Justice announced charges of sanctions evasion and arrests related to an oil trafficking network that finances Iran's Islamic Revolutionary Guard Corps.

The U.S. Department of Justice confiscated more than 520,000 barrels of sanctioned Iranian oil aboard the crude tanker Abyss, which was anchored in the Yellow Sea on its way to China.

Iran's budget envisages oil sales of 1.35 million barrels per day during the Iranian year beginning in March 2024, which is about 1.3% of the 103.5 million barrels per day of global supply projected by the International Energy Agency.

Ukraine's strikes on terrorists in Russia

In Russia, two Ukrainian attack drones struck a major oil refinery in the south of the country. This is the latest in a series of long-range attacks on Russian oil facilities that have led to a reduction in Russia's crude exports.

Lukoil, which owns the 300,000 barrels per day Volgograd refinery, later said that the plant was operating normally.

On the night of February 3, two Security Service of Ukraine's drones hit the refinery's primary oil processing unit in Volgograd, without which the refinery will lose a significant part of its production capacity.

Attacks by Ukrainian drones on Russian refineries are becoming more systematic. In particular, a drone attacked one of the largest oil refineries in Yaroslavl.

RBC-Ukraine's sources also reported that SBU drones hit a Tuapse oil refinery, causing a massive fire.

In addition, SSU drones hit an oil terminal in Ust-Luga.