Oil Market Volatility: Navigating Risks from Russian Crude Flows and U.S. Refinery Labor Strikes

The global oil market in 2025 is navigating a perfect storm of geopolitical instability and domestic supply chain disruptions, with Russian crude exports and U.S. refinery labor strikes emerging as critical drivers of volatility. For investors in energy infrastructure and exchange-traded funds (ETFs), these dynamics present near-term risks that demand careful scrutiny.

Russian Crude Exports: A Shifting Landscape

Russian crude oil exports in August 2025 averaged 4.3 million barrels per day (b/d), a modest decline from 4.8 million b/d in 2024, as sanctions and geopolitical tensions reshaped trade flows Russia's oil exports have decreased modestly since 2022, shifting...^[1]. China and India now dominate as recipients, with exports to these nations reaching 2.0 million b/d and 1.6 million b/d, respectively August 2025 — Monthly analysis of Russian fossil fuel...^[2]. However, the International Energy Agency (IEA) reported a sharp drop in Russian oil and fuel export revenues to $13.51 billion in August 2025, a $920 million decline from July, driven by falling Urals crude prices and a widening discount on Russian crude Russia's oil and fuel export revenue fell in August, IEA says^[3].

Geopolitical risks have further complicated the supply chain. Ukrainian drone strikes on Russian refineries and export terminals have reduced refining capacity by 17% (1.1 million b/d) and disrupted domestic fuel supplies Ukraine strikes choke off Russian oil exports and fuel...^[4]. Meanwhile, the reliance on a "shadow fleet" of sanctioned tankers to transport Russian oil has introduced safety and regulatory risks, with 12% of August exports carried on vessels under sanctions August 2025 — Monthly analysis of Russian fossil fuel...^[5]. These disruptions have already triggered short-term volatility in global crude prices, with Brent and WTI futures reacting to fears of supply interruptions Oil rises as market weighs Russia supply risk and U.S. rate...^[6].

U.S. Refinery Labor Strikes: Compounding Challenges

While direct data on 2025 U.S. refinery labor strikes is sparse, the broader refining sector is under significant strain. Refinery utilization rates in the U.S. fell to 90.3% in Q4 2024, but analysts have slashed profit expectations for the downstream sector by 24% due to tepid fuel demand and global oversupply U.S. Refiners Face Headwinds in 2025^[7]. The threat of a 25% tariff on Canadian and Mexican crude—proposed by the incoming U.S. administration—could further erode refining margins, as 55% of U.S. crude imports originate from these countries U.S. refiners face new challenges in 2025^[8].

Refinery closures, such as Valero's Benicia facility and LyondellBasell's Houston refinery, have reduced U.S. refining capacity by 3% in 2025 Refinery closures and rising consumption will reduce U.S.^[9]. These closures, combined with labor strikes, have tightened regional fuel inventories, particularly for diesel and jet fuel, and widened refining margins. For example, Gulf Coast refining margins rose to $25 per barrel in early September 2025, a 15% increase from July Oil prices and refinery margins fell slightly in first quarter of 2025^[10]. However, the long-term outlook remains bleak, with European refining utilization projected to drop to 81% by 2027 as margins stall amid energy transition pressures Europe's refining sector braces for major downsizing as margins...^[11].

Energy Infrastructure ETFs: Volatility and Exposure

Energy infrastructure ETFs, such as the Alerian Energy Infrastructure ETF (ENFR) and Global X MLP & Energy Infrastructure ETF (MLPX), are particularly vulnerable to these disruptions. ENFR, with a 0.35% expense ratio and a 4.85% trailing dividend yield, has outperformed MLPX (4.69% yield) in 2025, but both funds face headwinds from refining sector instability Comparing Energy Infrastructure ETFs: MLPX vs ENFR^[12]. Midstream companies, which form the core of these ETFs, rely on fee-based revenue models, but disruptions in crude flows and refining operations could strain cash flows.

For instance, the EU's accelerated phase-out of Russian oil imports and the U.S. refining sector's exposure to geopolitical tariffs could lead to prolonged volatility in energy infrastructure ETFs. A 2025 report by EY highlights that supply chain disruptions in energy infrastructure are now compounded by labor strikes, reshoring efforts, and inventory management challenges, all of which could amplify ETF performance swings Straws in the wind: supply chain quarterly update | EY^[13].

Strategic Implications for Investors

Investors must weigh the interplay between Russian crude volatility and U.S. refining challenges. Energy infrastructure ETFs like ENFR and MLPX offer exposure to fee-based midstream assets but remain sensitive to sector-specific shocks. Diversification into upstream energy ETFs (e.g., XLE) or hedging against geopolitical risks may mitigate near-term volatility.

However, the path forward is fraught. With Russian oil revenues projected to fall by 23% year-on-year in September 2025 Russia's Oil and Gas Revenues Face Significant September Decline^[14] and U.S. refining margins at multi-year lows 2025 Refining and fuels outlook: Another challenging...^[15], the energy sector's resilience will be tested. For now, a cautious approach—prioritizing liquidity and sector rotation—appears prudent in this high-stakes environment.