Ukraine halted oil flows to Europe over payment issue, Russia's Transneft says
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Loading... - Itatay Tchinda
- 10 Aug 2022
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Ukraine has suspended Russian oil pipeline flows to parts of central Europe since early this month because Western sanctions prevented it from accepting transit fees from Moscow, Russian pipeline monopoly Transneft said on Tuesday.
International benchmark Brent crude jumped to trade as the news added to energy supply concerns, but turned negative later in the day.
Europe is heavily reliant on Russian crude, diesel, natural gas and coal. Energy prices have rallied this year on short supply as Europe scrambles to replace Russian energy with alternative sources.
Flows along the southern route of the Druzhba pipeline have been affected while the northern route serving Poland and Germany remains uninterrupted.
The suspension of pipeline flows on Tuesday will hit countries such as Slovakia, Hungary and the Czech Republic, which all rely heavily on Russian crude and have limited ability to import alternative supply by sea.
The fact that refiners have to import seaborne oil on such short notice will make the job to secure alternative supply even more difficult in an already tight oil market, traders said.
Hungarian energy firm MOL and Slovak pipeline operator Transpetrol confirmed flows have been halted for a few days over the payment of transit fees.
MOL said it had reserves for several weeks and was working on a solution. MOL's oil refiner Slovnaft said that it initiated discussions with Ukraine and Russian partners on possible payment of the transit fee by Slovnaft or MOL.
Hungary is one of the most reliant countries on Russia oil and its government has been lobbying hard to get exemption from wider EU sanctions on Moscow.
Hungary can import oil via Adria pipeline that connects the Omisalj oil terminal in Croatia to its Duna refinery in Hungary, but the capacity of the route is limited and shipments are much more expensive than via Druzhba.
Slovakia's options for alternative oil imports are even more limited as it has to import oil via Hungary.
Poland's PKN Orlen (PKN.WA), which controls refiner Unipetrol in the Czech Republic, may secure alternative supplies from Trieste in Italy via the Transalpine (TAL) pipeline, though the route is operating close to its limited capacity and might not be enough to fulfil feedstock needs, traders said. Read More...
