In November, Ukraine significantly increased drone strikes against Russian energy infrastructure, affecting refineries and tankers in the Black Sea. As a result, daily oil processing dropped to about 5 million barrels, down from 5.3 to 5.5 million barrels earlier this autumn. Ukraine carried out more attacks on Russian energy facilities in November than in previous months. Drones struck Russian refineries at least 14 times and targeted two tankers in the Black Sea, including one that previously transported Russian oil.

Black Sea Terminal and CPC Exports

A drone destroyed a mooring facility at a Black Sea oil terminal crucial for the Caspian Pipeline Consortium (CPC) exports. Kazakhstan had been sending an average of 1.5 million barrels per day to the terminal via this pipeline. This situation worsened as another mooring was out of service for maintenance. Despite this challenge, loading operations at the only remaining mooring have started again. Last month’s record number of attacks signals a growing risk to supply. The decline in Russian refinery processing to 5 million barrels per day tightens the market for refined products, such as diesel. This could lead to rising prices as we move into winter.

Geopolitical Risk and Market Impact

Brent crude futures were already above $92 per barrel in early December, making the market sensitive to supply disruptions. This mirrors the price swings we experienced in 2022, when geopolitical events quickly increased oil prices. With OPEC+ deciding to maintain output levels, these issues in Russia could have a significant impact. We think buying near-term call options on Brent and heating oil futures is a smart way to benefit from potential price spikes. The rise in attack frequency suggests that implied volatility will increase, making options more expensive soon. It’s important to act in the coming weeks to stay ahead of market shifts. We are also closely monitoring crack spreads, especially for diesel, because refinery outages affect refined product supply more than crude oil. Going long on the “crack” could be profitable, as the value of these products may rise faster than crude oil prices. Recent data shows that crack spreads have widened by over 5% since mid-November, a trend we expect to continue. The damage to the CPC export terminal, which manages around 1.5 million barrels per day, adds more uncertainty to crude supply. While loading has resumed, operating with only one of the three mooring points creates a bottleneck and increases the risk of future attacks. This vulnerability poses a threat to seaborne crude heading to Europe, possibly widening the Brent-WTI spread. Create your live VT Markets account and start trading now.

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