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Julian Lee
10 luglio 2022 07:00 CEST
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Julian Lee is an oil strategist for Bloomberg First Word. Previously he worked as a senior analyst at the Centre for Global Energy Studies. @JLeeEnergy
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In this article
CL1
WTI Crude
103.45
USD/bbl.
-1.34-1.28%
ROSN
ROSNEFT
343.80
RUB
-7.40-2.11%
BP/
BP PLC
384.60
GBp
-1.95-0.50%
GAZP
GAZPROM
188.90
RUB
-9.10-4.60%
Open
Russia is threatening to use oil from neighboring Kazakhstan as a weapon against European countries supporting Ukraine. A court order this month to close the export terminal on the Black Sea for a month is a clear warning to Europe of Russia’s leverage.
On Tuesday, a Russian judge in the town of Novorossiysk on the Black Sea coast ordered the Caspian Pipeline Consortium to halt shipments for 30 days. Suspension of operations was sought as punishment for a number of “documentary violations” under CPC’s Oil Spill Response Plan, which the company had been given until the end of November to rectify.
It Doesn't Look Russian At All
CPC Blend crude is overwhelmingly of Kazakhstani origin
Source: Bloomberg calculation using data from the Caspian Pipeline Consortium
Note: Data haven't been published for shipments since February
Although the facility is in Russia, about 90% of the crude that passes through it comes from Kazakhstan. That makes it an ideal weapon in President Vladimir Putin’s arsenal to inflict economic pain on his tormentors. Halting CPC will remove as much as 1.5 million barrels a day of much-needed crude from the global oil market, while barely denting Russia’s own flows.
Of course, Putin hasn’t said explicitly that’s his aim. The use of regional courts to halt oil flows offers the Kremlin plausible deniability. But the process follows a familiar pattern.
The initial investigation into oil-spill response procedures at the export terminal was ordered by a Russian deputy prime minister whose recent experience was in the agriculture and land-registration sectors, raising the suspicion that there was a political motivation behind it.
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Russia has history when it comes to using the courts for political ends. Just look at the hounding of TNK-BP and its foreign executives in 2008, prior to the oil venture’s eventual takeover by state-backed Rosneft PJSC; BP Plc’s experience with its Kovykta gas field in Siberia, or the raft of obstacles put in the way of the Sakhalin 2 LNG project that culminated in Gazprom PJSC taking a majority stake in the operation in 2006.
CPC Shipments
Two-thirds of CPC crude exports typically end up in Europe
Source: Vessel tracking data monitored by Bloomberg
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The CPC export terminal has suffered a series of unfortunate events since Russian troops invaded Ukraine. In late March, the terminal was partially shut for a month after a storm reportedly damaged two of the three loading buoys. Then in mid-June, loadings were again suspended from two moorings for a survey of the surrounding water area, which led to the discovery of a number of World War II mines. A skeptic might have expected mine removal to have been a priority when the buoys were first installed.
As much as two-thirds of CPC Blend exports typically end up in Europe, with significant volumes directed to Central Europe through pipelines from the Italian port of Trieste. The impact on the Mediterranean crude market, in particular, where the supply is already the tightest it has been in years, would be severe.
Combined monthly exports from Azerbaijan, Kazakhstan, Libya, the North Sea and West Africa — all major suppliers to Europe — fell by more than 1 million barrels a day in June, according to tanker tracking data compiled by Bloomberg.
Less Supply
Key suppliers of crude to Europe shipped less in June
Source: Vessel tacking data monitored by Bloomberg
Note: Libya's exports have fallen by 450,000 barrels a day since January
Exports from Libya were down by nearly half from last year’s average and look like they’re falling further this month, as unrest grips the country once again. Like CPC Blend, Libya’s crudes are light and sweet, meaning they yield lots of transport fuels and contain little sulfur. That makes them attractive right now and hard to replace.
The threat of a halt to CPC shipments will hang over the oil market at least until Monday, when a court in the Krasnodar region, where the terminal is located, is scheduled to hear the company’s appeal against the ruling. That raises hopes that disruption can be avoided, but there's no guarantee that CPC’s appeal will be successful.
Meanwhile, the threat has left traders scrambling for alternatives. Regional crudes are commanding the highest premiums to benchmark Dated Brent that several traders could remember.
https://sponsored.bloomberg.com/immersive/bmw/a-process-driven-by-passion
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BMW’s Design Chief Lifts the Hood on the New 8 Series
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Even if the ban is overturned, Russia has sent a clear warning to Europe that it can disrupt crude flows almost at will and that it’s willing to inflict extreme economic damage on its neighbors in the process.
More From Bloomberg Opinion:
Julian Lee
10 luglio 2022 07:00 CEST
Listen to this article
3:46
Share this article
Follow the authors
Julian Lee is an oil strategist for Bloomberg First Word. Previously he worked as a senior analyst at the Centre for Global Energy Studies. @JLeeEnergy
+ Get alerts forJulian Lee
In this article
CL1
WTI Crude
103.45
USD/bbl.
-1.34-1.28%
ROSN
ROSNEFT
343.80
RUB
-7.40-2.11%
BP/
BP PLC
384.60
GBp
-1.95-0.50%
GAZP
GAZPROM
188.90
RUB
-9.10-4.60%
Open
Russia is threatening to use oil from neighboring Kazakhstan as a weapon against European countries supporting Ukraine. A court order this month to close the export terminal on the Black Sea for a month is a clear warning to Europe of Russia’s leverage.
On Tuesday, a Russian judge in the town of Novorossiysk on the Black Sea coast ordered the Caspian Pipeline Consortium to halt shipments for 30 days. Suspension of operations was sought as punishment for a number of “documentary violations” under CPC’s Oil Spill Response Plan, which the company had been given until the end of November to rectify.
It Doesn't Look Russian At All
CPC Blend crude is overwhelmingly of Kazakhstani origin
Source: Bloomberg calculation using data from the Caspian Pipeline Consortium
Note: Data haven't been published for shipments since February
Although the facility is in Russia, about 90% of the crude that passes through it comes from Kazakhstan. That makes it an ideal weapon in President Vladimir Putin’s arsenal to inflict economic pain on his tormentors. Halting CPC will remove as much as 1.5 million barrels a day of much-needed crude from the global oil market, while barely denting Russia’s own flows.
Of course, Putin hasn’t said explicitly that’s his aim. The use of regional courts to halt oil flows offers the Kremlin plausible deniability. But the process follows a familiar pattern.
The initial investigation into oil-spill response procedures at the export terminal was ordered by a Russian deputy prime minister whose recent experience was in the agriculture and land-registration sectors, raising the suspicion that there was a political motivation behind it.
Opinion. Data. More Data.
Get the most important Bloomberg Opinion pieces in one email.
Sign Up
Bloomberg may send me offers and promotions.
By submitting my information, I agree to the Privacy Policy and Terms of Service.
Russia has history when it comes to using the courts for political ends. Just look at the hounding of TNK-BP and its foreign executives in 2008, prior to the oil venture’s eventual takeover by state-backed Rosneft PJSC; BP Plc’s experience with its Kovykta gas field in Siberia, or the raft of obstacles put in the way of the Sakhalin 2 LNG project that culminated in Gazprom PJSC taking a majority stake in the operation in 2006.
CPC Shipments
Two-thirds of CPC crude exports typically end up in Europe
Source: Vessel tracking data monitored by Bloomberg
More from
BloombergOpinion
The Price of Not Buying Twitter
Elon Musk Isn’t the Only One to Blame for the Twitter Mess
Presidents Aren’t Kings. Remember That, Democrats.
Haven’t Had Covid Yet? Maybe You’ve Just Been Lucky
The CPC export terminal has suffered a series of unfortunate events since Russian troops invaded Ukraine. In late March, the terminal was partially shut for a month after a storm reportedly damaged two of the three loading buoys. Then in mid-June, loadings were again suspended from two moorings for a survey of the surrounding water area, which led to the discovery of a number of World War II mines. A skeptic might have expected mine removal to have been a priority when the buoys were first installed.
As much as two-thirds of CPC Blend exports typically end up in Europe, with significant volumes directed to Central Europe through pipelines from the Italian port of Trieste. The impact on the Mediterranean crude market, in particular, where the supply is already the tightest it has been in years, would be severe.
Combined monthly exports from Azerbaijan, Kazakhstan, Libya, the North Sea and West Africa — all major suppliers to Europe — fell by more than 1 million barrels a day in June, according to tanker tracking data compiled by Bloomberg.
Less Supply
Key suppliers of crude to Europe shipped less in June
Source: Vessel tacking data monitored by Bloomberg
Note: Libya's exports have fallen by 450,000 barrels a day since January
Exports from Libya were down by nearly half from last year’s average and look like they’re falling further this month, as unrest grips the country once again. Like CPC Blend, Libya’s crudes are light and sweet, meaning they yield lots of transport fuels and contain little sulfur. That makes them attractive right now and hard to replace.
The threat of a halt to CPC shipments will hang over the oil market at least until Monday, when a court in the Krasnodar region, where the terminal is located, is scheduled to hear the company’s appeal against the ruling. That raises hopes that disruption can be avoided, but there's no guarantee that CPC’s appeal will be successful.
Meanwhile, the threat has left traders scrambling for alternatives. Regional crudes are commanding the highest premiums to benchmark Dated Brent that several traders could remember.
https://sponsored.bloomberg.com/immersive/bmw/a-process-driven-by-passion
Sponsored Content
BMW’s Design Chief Lifts the Hood on the New 8 Series
BMW
Even if the ban is overturned, Russia has sent a clear warning to Europe that it can disrupt crude flows almost at will and that it’s willing to inflict extreme economic damage on its neighbors in the process.
More From Bloomberg Opinion:
