Russian oil refineries have restored significant operational capacity in recent weeks following a U.S.-brokered agreement that halted drone attacks on key energy infrastructure, sources familiar with the matter said.
Drone strikes had idled an estimated 1.2 million barrels per day of Russian refining capacity, according to industry analysts. The attacks tightened global refined product markets, notably for diesel and gasoline, and embedded a geopolitical risk premium in crude oil futures. The return of this capacity is reducing that premium and flattening the front end of the oil curve.
Brent crude futures fell 1.8 percent to $82.50 a barrel, while West Texas Intermediate dropped 2.1 percent to $78.90. Energy sector credit spreads, which had widened during the attacks, have begun to compress, reflecting improved cash flow visibility for refiners.
Lower crude prices ease headline inflation pressure, which can shift central bank rate expectations. A sustained decline could prompt yield curve flattening if long-term inflation expectations moderate. Duration-sensitive fixed-income instruments—particularly longer-dated nominal Treasuries—could see yields compress if the inflation outlook softens.
