Released March 25, 2022 | SUGAR LAND
en
Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Adding insult to injury, a major pipeline carrying Kazakh and Russian crude oil to the Black Sea suffered what was said to be a weather-related outage, an outage that because of Western sanctions may be hard to address.
West Texas Intermediate, the U.S. benchmark for the price of oil, closed the Wednesday session at $114.93 per barrel, up 2.8% on the day. The rally followed word from the Moscow-headquartered Caspian Pipeline Consortium that its loading terminals at the Russian Black Sea port of Novorossiysk would close due to storm damage.
Click on image at right for a look at oil exports from the Port of Novorossiysk.
The 930-mile pipeline is connected to major oil fields in Kazakhstan, a former Soviet republic still under the influence of the Kremlin, and has some room for Russian crude oil. The outage leaves around 1 million barrels per day of crude oil effectively stranded, compounding a lingering supply-side issue that has only been exacerbated by the war in Ukraine.
Western sanctions on Russia imposed in retaliation to the invasion have effectively left the country financially isolated from the global market, though crude oil and natural gas continue to move more or less freely. Fears of getting stuck in the sanctions web or caught with untradable cargoes, however, have worked to idle at least some of the flows.
Some eyebrows were raised on the closure of loading units off Novorossiysk, not far from the Crimean Peninsula. According to the pipeline consortium, the marine terminal allows for tankers to take cargoes "safely at significant distance offshore, including in poor weather conditions."
Discussing the issue recently with The Financial Times, Bob McNally, the head of the Rapidan Energy Group, used scare quotes when referring to the outage.
"If a weather-related 'accident', it is certainly a convenient one from Moscow's standpoint," he said.
The disruption came on the eve of a visit to Europe by U.S. President Joe Biden to discuss the war in Ukraine. Russian companies hold a controlling interest in the pipeline consortium, though several Western players also are involved.
Click on the image at right to see the shareholders in Caspian Pipeline Consortium. Image from Caspian Pipeline Consortium.
Meanwhile, because of the way U.S. sanctions are structured, it may be difficult to repair the pipeline given the prohibitions on dealing with Russian entities. That adds insult to injury regarding Russia's financial woes, but does little to address supply-side issues for Western economies. If you're buying the myth, meanwhile, it could be seen as Russia self-sanctioning to exploit dependencies on its crude oil.
With Western pressure mounting, meanwhile, Russia has found steady customers in China and India. Nevertheless, the commodities market is a global one, and shortages were already a growing concern before the Russian invasion of Ukraine in late February. In the U.S. alone, crude oil inventories are about 13% below the five-year average for this time of year.
In the age of disinformation campaigns, it would be easy to cry foul over the latest disruption considering the proximity to the fighting in Ukraine and the diplomatic effort underway in Europe with President Biden's visit. But conspiracy theories aside, oil breaking above $50 per barrel one year ago was met with concerns of a higher-for-longer outlook. With war running through the heart of the commodity sector, that mantra still holds some $60 per barrel later.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
West Texas Intermediate, the U.S. benchmark for the price of oil, closed the Wednesday session at $114.93 per barrel, up 2.8% on the day. The rally followed word from the Moscow-headquartered Caspian Pipeline Consortium that its loading terminals at the Russian Black Sea port of Novorossiysk would close due to storm damage.
Click on image at right for a look at oil exports from the Port of Novorossiysk.The 930-mile pipeline is connected to major oil fields in Kazakhstan, a former Soviet republic still under the influence of the Kremlin, and has some room for Russian crude oil. The outage leaves around 1 million barrels per day of crude oil effectively stranded, compounding a lingering supply-side issue that has only been exacerbated by the war in Ukraine.
Western sanctions on Russia imposed in retaliation to the invasion have effectively left the country financially isolated from the global market, though crude oil and natural gas continue to move more or less freely. Fears of getting stuck in the sanctions web or caught with untradable cargoes, however, have worked to idle at least some of the flows.
Some eyebrows were raised on the closure of loading units off Novorossiysk, not far from the Crimean Peninsula. According to the pipeline consortium, the marine terminal allows for tankers to take cargoes "safely at significant distance offshore, including in poor weather conditions."
Discussing the issue recently with The Financial Times, Bob McNally, the head of the Rapidan Energy Group, used scare quotes when referring to the outage.
"If a weather-related 'accident', it is certainly a convenient one from Moscow's standpoint," he said.
The disruption came on the eve of a visit to Europe by U.S. President Joe Biden to discuss the war in Ukraine. Russian companies hold a controlling interest in the pipeline consortium, though several Western players also are involved.
Click on the image at right to see the shareholders in Caspian Pipeline Consortium. Image from Caspian Pipeline Consortium.Meanwhile, because of the way U.S. sanctions are structured, it may be difficult to repair the pipeline given the prohibitions on dealing with Russian entities. That adds insult to injury regarding Russia's financial woes, but does little to address supply-side issues for Western economies. If you're buying the myth, meanwhile, it could be seen as Russia self-sanctioning to exploit dependencies on its crude oil.
With Western pressure mounting, meanwhile, Russia has found steady customers in China and India. Nevertheless, the commodities market is a global one, and shortages were already a growing concern before the Russian invasion of Ukraine in late February. In the U.S. alone, crude oil inventories are about 13% below the five-year average for this time of year.
In the age of disinformation campaigns, it would be easy to cry foul over the latest disruption considering the proximity to the fighting in Ukraine and the diplomatic effort underway in Europe with President Biden's visit. But conspiracy theories aside, oil breaking above $50 per barrel one year ago was met with concerns of a higher-for-longer outlook. With war running through the heart of the commodity sector, that mantra still holds some $60 per barrel later.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
