Ukraine Suffers Mass Power Outages After Russian Infrastructure Attacks

Russian drone and missile attacks on Ukrainian energy infrastructure have left about a million people in the Ukraine without power.

The Ukraine’s largest private grid operator, DTEK, reported, as cited by Al Jazeera, that five of the six power plants it operates have been damaged, with 80% of their generating capacity lost.

The power utility also said that 180,000 people were without power in the Odessa region following a Russian attack.

“These attacks are, in the Kremlin’s words, revenge for attacks that Ukraine had been making deep inside Russia, targeting their energy facilities and oil installations,” Al Jazeera reporter Charles Stratford said.

The United States had urged Ukraine to stop its attacks on Russia's refineries on concerns that any Russian retaliation could result in a spike in crude oil prices. Rising crude oil prices, which lead to higher gasoline prices, are problematic for sitting U.S. presidents in election years.

As of last week, some 14% of Russia’s refining capacity was taken offline by the Ukrainian drone attacks, translating into around 900,000 barrels daily. JP Morgan had estimated earlier that Russia’s refinery capacity outages could add a significant risk premium to the middle distillates market, banking on it taking weeks or even months to restore the capacity. Bank analysts have estimated that risk premium at $4 per barrel.

Brent continues higher, meanwhile, with the Russian developments one of the factors driving prices. What’s more, Deputy Prime Minister Alexander Novak said at the end of last week that going forward Russia will focus more on reducing oil production rather than exports as it did in previous months to comply with the OPEC+ effort to reduce supply and boost prices. Idled refinery capacity is at least part of the reason for this decision as Russia does not have a lot of storage capacity for crude.

By Charles Kennedy for Oilprice.com

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