Moscow suffers its "largest attack to date," Ukraine "strikes key Russian oil industry facilities," exacerbating the global "refining crisis."

The impact of geopolitical conflicts on global energy infrastructure is intensifying, with Ukraine's major drone strike on a Russian refinery in Moscow pushing the already strained global refined oil market to the brink of a new crisis.

According to CCTV News , on September 20th local time, the General Staff of the Ukrainian Armed Forces reported that Ukrainian forces launched an attack on the Moscow oil refinery in the Moscow region of Russia in the early hours of the day. The Ukrainian side stated that a large-scale fire broke out in the refinery area, and the AVT-6 primary refining unit and integrated crude oil processing unit were damaged. The Ukrainian military stated that the Moscow oil refinery is one of Russia's largest oil refining enterprises, with an annual crude oil processing capacity of approximately 12 million tons, producing petroleum products such as gasoline, diesel, aviation fuel, and heavy oil. The Ukrainian side stated that the refinery is involved in supplying the needs of the Russian Armed Forces.

This event quickly triggered deep concerns in the market about the supply of diesel, a key fuel for global industry and transportation. With two wars in Eastern Europe and the Middle East simultaneously restricting export capacity from key oil-producing regions around the world, global diesel futures and refining margins have soared to record highs, and US diesel retail prices have also broken historical records.

Amid a sharp drop in supply, the United States, currently a key global "last resort," is facing immense domestic political pressure. Calls are growing louder in Washington for restricting or even banning diesel exports, with analysts warning that such a move could further disrupt the global energy supply chain and trigger wider economic turmoil.

Record-breaking airstrikes devastate Russia's energy hub

According to CCTV News and other media reports, the September 20th attack was the "largest attack" to ever hit the Russian capital. Moscow Mayor Sobyanin stated that more than 1,600 drones had been shot down since the 19th, 450 of which were shot down as they approached Moscow. The Moscow oil refinery suffered severe damage in the attack.

According to reports from Global Times , Ukrainian President Volodymyr Zelenskyy posted on the social media platform X later on the 20th, commenting on the attacks. In his post, Zelenskyy stated that Ukraine's long-range strikes on the Moscow region last night "had a very significant impact." He claimed that a major Russian oil industry facility and logistics infrastructure were hit.

The refinery, owned by Gazprom Neft, is located approximately 16 miles from the Kremlin and has a daily crude oil processing capacity of about 245,000 barrels (annual capacity of about 12 million tons). The General Staff of the Armed Forces of Ukraine reported that the AVT-6 primary refining unit and integrated crude oil processing units at the plant were attacked. This facility primarily produces gasoline, diesel, and aviation fuel, supplying not only the metropolitan area surrounding Moscow but also directly supporting the needs of the Russian Armed Forces.

In response, Russia launched a new round of airstrikes against multiple locations in Ukraine. According to the Ukrainian State Emergency Service and Air Force, the Russian military launched 138 drones, attacking industrial and railway facilities in Kyiv, Vinnytsia, and Odessa regions. The attack in Kyiv has so far resulted in four deaths.

The global diesel market is in crisis, with prices hitting record highs.

The attack on Moscow comes at a time of extreme fragility in global diesel supplies. Bloomberg data shows that global diesel futures and refining margins both climbed to record highs last week as supplies in the Gulf region and Russia were severely disrupted. The U.S. heating oil crack spread, a measure of the price difference between fuel and crude oil, surged to $117 per barrel, the highest level Bloomberg has recorded since it began collecting this data in 2009.

As previously reported by Wall Street News , U.S. diesel retail prices broke through $6 per gallon for the first time last week, and further climbed to $6.45 this Friday, setting a new record high. Globally, fuel shortages have occurred at gas stations in rural Brazil, Libya, and some African countries, posing a severe challenge to the key fuels upon which global industry, transportation, and agriculture rely.

Bloomberg senior commodities strategist Mike McGlone warned that the current diesel price shock mirrors the surge in gasoline prices during the 2008 energy crisis. Meanwhile, reports that Russia is considering extending its diesel export ban further exacerbate already tight supply conditions.

Geopolitical conflicts have disrupted the oil refining landscape of the past decade.

The current predicament of the global refining system stems from the intense clash between the capacity expansion pattern of the past decade and current geopolitical conflicts. Over the past decade, the Middle East and Russia have invested heavily in expanding their refining capacity. Kuwait, the UAE, Iraq, and Saudi Arabia have built or expanded large-scale refineries, enabling the Middle East to double its diesel exports between 2017 and 2025, surpassing North America to become the world's largest diesel exporter.

However, according to the International Energy Agency (IEA), the two wars have abruptly reversed this supply pattern. Since February of this year, obstructed passage through the Strait of Hormuz has forced Kuwait, the UAE, and Iraq to significantly reduce their exports; meanwhile, Houthi attacks have compressed Saudi Arabia's export capacity via the Red Sea. David Martin, senior oil market analyst at the IEA, stated, "We are witnessing what may be the most tense diesel market situation in history."

Furthermore, Western countries have struggled to fill this gap during the crisis. Alan Gelder, Senior Vice President of Refining at consulting firm Wood Mackenzie, points out that massive investments in Middle Eastern countries have long suppressed profit margins for Western refiners, resulting in major Western oil companies not building new refineries for nearly three decades, and more than ten refineries closing in Europe and the US since 2015. Currently, although Western refineries are operating at full capacity and shifting towards diesel production, they are still unable to effectively fill the supply gap.

The dispute over US export bans exacerbates market uncertainty.

Amid soaring domestic oil prices, the debate within the United States regarding an export ban is intensifying rapidly. Representative Tim Burchett introduced a diesel export ban bill this week, and Senate Majority Leader John Thune has also expressed openness to the proposal. Trump, however, blames the rising oil prices on the Russia-Ukraine war, rather than the situation in the Middle East. But IEA data shows that the amount of diesel blocked in the Persian Gulf is approximately three times the amount shortfall Russia is facing.

Analysts and several think tanks have strongly warned that the U.S. export ban will not only fail to solve domestic problems but will also harm the world. The American Petroleum Institute, in a letter to then-Energy Secretary Jennifer Granholm as early as 2022, pointed out that restricting exports would drive up domestic oil prices.

Research from the Center for Strategic and International Studies (CSIS), the Federal Reserve Bank of Dallas, and Columbia University all indicates that U.S. refining capacity is highly concentrated along the Gulf Coast, with its infrastructure designed entirely for export markets. Domestic pipelines are currently nearing full capacity, and global tanker capacity is strained. The CSIS report emphasizes that if a ban is implemented, Gulf Coast refiners will inevitably drastically reduce refining activities due to unprofitability. This will lead to a decrease in domestic gasoline and diesel supply, partially or completely offsetting initial inventory buildup. Ultimately, this will put upward pressure on domestic oil prices, which the ban was intended to suppress, and will inevitably trigger further price surges in other parts of the world.

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