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Russian oil refiners signal deeper cuts to refinery runs amid overstocking -Breaking

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© Reuters. FILEPHOTO: This is a view showing a typical oil refinery in Omsk at sunset on March 16, 2022. REUTERS/Alexey Malgavko

(Reuters] – Four people familiar with the situation told Reuters that the Energy Ministry has been informed by major Russian oil refiners they plan to reduce their refinery production in order to deal with overstocking caused by a drop in European purchases.

Sources said that the four biggest refiners in the country – Rosneft (MCX:) Neft), Surgutneftegaz and Lukoil – raised the matter during a meeting last Friday with officials.

Sources said that additional refining cuts would be made in addition to planned maintenance shut downs.

Rosneft, Surgutneftegaz, Lukoil, Gazprom Neft have not yet responded to inquiries for comment.

According to Refinitiv Eikon data, and Reuters calculations Russia’s March idle oil refining capacity has increased more than twice from its initial plan to 3.753million tonnes. This is the largest March record refinery capacity loss.

Refiners did not specify the exact volume of refining cuts required in April, however they expect them to be much higher than 3.243 million tonnes as suggested by a first spring maintenance plan.

While sanctions placed by the West on Russia don’t directly target its energy sector, concerns about financing, shipping, and insurance have reduced the appeal of Russian energy to potential buyers.

Russian oil products sales are under severe pressure from March 1, as buyers avoid the spot market and reduce their demand.

Many march-loading freights of fuel oil, diesel, naphtha and other petroleum products (VGO) were cancelled because offtakers refused to accept them. Products are left in storage tanks or railcars which causes congestion and limits shipping flexibility.

Overstocking has forced some major refineries, such as Rosneft’s Tuapse (240,000 barrels per day) plant to close their doors since mid March.

Transneft is a pipeline network operator and has restricted its intake because of overstocking.

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