• Global refining crunch to keep fuel prices high
• Nigerians to continue facing petroleum agony
Energy analysts posit that damaged refineries in the Middle East and Russia, amid insufficient capacity elsewhere to offset the supply disruptions will likely keep global fuel prices elevated into 2027.
In addition, the global refining crunch which has kept fuel prices high for many months this year would continue into the next year, according to the analysts.
The Middle East conflict, in particular the Iranian war, and Houthi strikes which targeted Saudi Aramco oil facilities in Jizan and Yanbu, as well as petroleum products and distribution infrastructure in Jeddah have slashed supply and deliveries from the region; while intensified Ukrainian strikes on Russian refineries have prompted a ban on diesel exports out of Russia.
A consequence of all this, are tightening of the global fuel markets, whereas capacity elsewhere, including in the United States, cannot offset the loss of refined product flows.
Nikhil Agarwal, managing director of Globestar Energy, while speaking at Energy Trading Week Middle East in Dubai, said: “Refining capacity will not come back so soon”. as .
Agarwal added: “Bapco is gone, the GTL Qatar is gone, Russian refineries are gone. It will take years to build them back and bring them on board”.
According to the energy expert whose statement was carried by The National, “Crude is surplus globally, but there is no refining capacity available to refine it and bring it to market”.
Other experts echoed that the fuel – especially diesel – markets show the real stress in the oil complex.
For example, July refinery crude throughputs remained at nearly 5 million barrels per day (bpd), which is below levels a year ago levels, at 80.9 million bpd.
The International Energy Agency (IEA) said in its monthly report in August: “capacity elsewhere in the system [are] currently unable to offset product supply bottlenecks”.
Brian Mandell, executive vice president of Marketing & Commercial at Phillips 66, while speaking on the Q2 earnings call in early August, said refining fundamentals are very tight and getting tighter with the issues in Russia and the Middle East.
According to Mandell, at least 7 million bpd of refineries are down in Asia and the Middle East and another 1.4 million bpd are down in Russia. “And the refineries, depending on the damage and the ability to get spare parts, are going to take a good long time to get back online,” he executive added.
However, Russian authorities have just announced that its oil output drop is temporary as its refineries would soon restart production, according to a report by OilPrice.com.
Deputy prime minister Alexander Novak said on Thursday September 3, that the dip in Russian oil production is only temporary, as output is expected to recover once refineries come back online after unscheduled maintenance.
“This is a temporary phenomenon, and, generally, oil production will increase as the refineries resume operations and the situation stabilizes,” Novak said, as carried by Russian news agency TASS.
Amid the ongoing fuel crisis in Russia, the authorities have regularly sought to alleviate concerns and talk up the resumption of refinery operations, which have been heavily disrupted by incessant Ukrainian drone attacks.
Novak said at an economic forum in Vladivostok on Thursday that fuel supply has improved this week, as authorities seek to play down the refinery outages caused by Ukrainian drone strikes.
Indeed, Russia has been suffering from a gasoline and diesel crunch since the spring, when Ukraine intensified its drone attacks at Russian refineries, aiming to cripple fuel supply to the front lines and to the domestic Russian market.
Meanwhile, following the strikes, Russia has banned diesel exports – a ban currently enforceable until the end of September – which has further tightened global middle distillate markets.
Oil production has also been suffering, as attacks have crippled both refinery operations and export capacities with Ukrainian strikes at terminals in the Black Sea and the Baltic Sea.
In light of all these disruptions, Rystad Energy has revised its Russian crude production forecast to average 8.95 million bpd in 2026, before declining to around 8.6 million bpd in 2027, down by about 90,000 bpd from the previous forecast.
Daria Melnik, vice president, oil & gas research at Rystad Energy, said: “The increasing frequency and effectiveness of drone attacks on Russian oil and gas infrastructure is no longer affecting only refineries; it’s constraining the country’s upstream sector as well”.
“Every barrel not processed by a refinery must either be exported, placed into storage or removed from production. While Russia was able to absorb that imbalance in June, July demonstrated that its export system cannot consistently handle the additional volumes,” Melnik added.
Back home in Nigeria and other countries in Africa, citizens would continue to face agony from peaking petroleum products prices, described as “petroleum agony” by a local energy analyst.
In Nigeria, pump prices for products such as PMS and diesel have been floating around N1,300 and N1,700. In particular, there are heightened fears that PMS will hit N1,500 and above before year end. The attendant effects are rising transportation costs and worsening food inflation.
