Russian Refineries Lift Crude Processing 25% in Second Half of October
Key Facts
Russian refineries increased crude processing 25% in the second half of October compared with the start of the month, after sustained drone attacks on their facilities stopped, Reuters reported, citing industry sources. The improvement in operations follows a period in which attacks damaged Russia’s refining capacity, putting supplies of petroleum products in focus for the market. On October 9, the U.S. president announced an agreement to supply Russia with more than 300,000 tons of diesel immediately, then 500,000 tons in November and 1 million tons after that, according to the Associated Press. But an announcement of volumes does not mean they will all reach the market or that supply constraints will disappear. The increase in processing and talk of additional shipments reflect two different ways to assess how much diesel may be available.
The International Energy Agency said in an assessment published on September 17 that Russian refinery processing reached 3.8 million barrels per day in June, its lowest level in more than 20 years and about 30% below its level a year earlier. The agency also estimated that diesel output had fallen about 30% from 2025 levels. These figures put the subsequent increase in processing in the context of a recovery from a low base and do not, on their own, prove that supplies have returned to previous levels. On October 9, S&P Global Energy reported that the ultra-low-sulfur diesel crack spread on the New York Mercantile Exchange fell $6.45 per barrel to $96.80, following the announcement of additional Russian supplies. The agency said the spread fell "$6.45 per barrel during the day to $96.80."
In the stock market, U.S. refiners’ shares had surged earlier in 2026, with the sector group up about 152% through October 8, compared with 14% for the S&P 500, Investing.com reported, citing Mizuho. The company said the rally had priced in much of the earnings improvement, leaving the stocks with an average upside of about 4% to their revised price targets. A Benzinga report on October 21 said Marathon’s stock had risen 190% year to date through that date, while Valero’s stock had gained 165%, compared with 12% for the index. The VanEck Oil Refiners ETF also fell 3.4% in the week before the report, although it remained up 74% year to date. These previous gains show that the sector’s valuation had risen substantially before the October 27 session, but they do not establish how the stocks performed in that session.
In company results, Valero reported net income of $6.8 billion, or $23.89 per share, in the third quarter on October 22, compared with $1.1 billion and $3.53 per share in the same period of 2025, according to its filing with the U.S. Securities and Exchange Commission. The figures reflect a substantial improvement in realized earnings, but do not, on their own, provide evidence of the direction of future refining margins. U.S. refineries recorded record capacity utilization of 96.3% in the third quarter, according to Mizuho. At the same time, the company said gasoline and diesel-like fuel inventories remained near the bottom of their historical ranges. It also estimated that capacity offline for maintenance would rise to 7% in 2027 from 5% in 2026, a factor that could affect future operating levels.
Crude oil ended the October 27 session lower: Brent futures fell $1.93, or 1.67%, to $113.88 per barrel, while West Texas Intermediate dropped $1.86, or 1.83%, to $99.90, Reuters reported. The agency attributed the decline to the effect of regional talks that eased some supply concerns, while shipping disruption risks persisted. The front-month New York Harbor ultra-low-sulfur diesel contract settled at $4.912 per gallon on October 26, according to EL7 data. A decline in crude alone is not enough to prove that refinery profitability has fallen, because the refining margin depends on the difference between the cost of oil and what facilities earn from fuel sales. The 3-2-1 measure assumes production of two barrels of gasoline and one barrel of diesel from three barrels of crude, according to Benzinga’s explanation.