Ukraine War: Oil Prices Soar By 5% As Closure Of Pipeline From Russia Cut Exports By 1.4 Million Barrels Daily

Oil exports from a crucial pipeline on Russia’s Black Sea coast have been fully halted on Wednesday, pushing crude prices higher amid fears that Moscow would interrupt energy supplies just as United States President Joe Biden arrives in Europe to discuss the war in Ukraine.

The Caspian Pipeline Consortium, the Moscow-headquartered group running a pipeline linking Kazakh oilfields with Russia’s Novorossiysk port, said on Wednesday that it was shutting down all three units used to load oil from the more-than-1,500km artery on to tankers, blaming storm damage.

The CPC’s Chief Executive, Nikolay Gorban, said on Wednesday that two of the terminal’s three mooring units had suffered “critical” damage and were completely inoperable.

He said that the third terminal was awaiting an inspection, but divers could not survey the damage until the storm cleared, he said.

“The loading is fully stopped due to objective reasons because of abnormal storms. We have found some damage that does not allow [us] to operate the single point moorings further safely,” he added.

He added that any repair work would be delayed by western companies’ unwillingness to supply parts.

Biden this month prohibited investments by Unites States companies in Russia’s energy sector and banned imports of oil from the country.

The full closure comes as European Union leaders prepare to discuss deeper sanctions on Moscow for its decision to invade Ukraine.

The full shutdown on Wednesday came less than a day after Moscow said it would partially shut the infrastructure to assess storm damage to the port’s single point moorings.

The latest move will halt the export of 1.4 million barrels a day of oil, higher than the one million a day expected from the partial shutdown on Tuesday.

Brent crude, the international oil marker, rose by five per cent to more than $121 a barrel on Wednesday.

Gorban said the pipeline could continue to pump oil to the coast for another day, but with no way of exporting the crude, the storage tanks at Novorossiysk would be filled by the end of Thursday, prompting a total closure of the pipeline.

The CPC mainly ships oil produced in Kazakhstan by companies including Chevron and ExxonMobil, as well as some Russian crude from fields along the route.

Chevron said earlier on Wednesday that exports from its Tengiz field continued uninterrupted.

Thaler said about 10 per cent of the CPC’s oil could be shipped through another pipeline between Baku, in Azerbaijan, and Ceyhan, in Turkey.

However, some production in Kazakhstan may have to be idled until the CPC reopened.

Three million barrels per day of Russian oil output is at risk beginning in April as sanctions hit and buyers shun the nation’s exports, the International Energy Agency had said.

“The prospect of large-scale disruptions to Russian oil production is threatening to create a global oil supply shock,” the Paris-based firm said in its monthly oil report, adding that this could ultimately be the “biggest supply crisis in decades.”

Russia is the third-largest oil producer behind the United States and Saudi Arabia. But Russia is the largest oil and products exporter in the world, and Europe depends on the nation for supplies.

In January 2022, total Russia oil and products production stood at 11.3 million barrels per day, or bpd, of which around eight million bpd is exported.