IEA: Dirty Russian Oil Affects 250,000 Bpd European Refinery Runs

  • May 15, 2019
  • Investing

The contamination issue with Russian oil pipeline supply will impact European refinery runs to the tune of 250,000 bpd in the second quarter, which is below 2 percent of Europe’s refined oil product demand, according to the International Energy Agency (IEA).

Last month, Russia halted supplies via the Druzhba oil pipeline to several European countries due to a contamination issue, which the Russians say was deliberate. Russian production has been curtailed because of the restricted exports via the Druzhba pipeline.

Hungary, Poland, and the Czech Republic were said earlier this month to be releasing a total of 8 million barrels from their respective strategic petroleum reserves to keep refineries operating after the contaminated crude oil forced the shutdown of the pipeline.

The oil was contaminated with organic chlorine, a substance used in oil production to boost output but dangerous in high amounts for refining equipment. The amounts of the chemical were found to be at levels much higher than the maximum allowable amount.

According to Russia’s energy ministry, normal deliveries via the pipeline are expected to resume in the second half of May.

Poland’s refiners PKN Orlen and Grupa Lotos said on Tuesday that they expected to start receiving in the coming days crude oil with normal quality via the Druzhba pipeline.

In its Oil Market Report on Wednesday, the IEA said that apart from the growing supply concerns in the Middle East, it is also monitoring the impact of the contamination of Russian crude oil passing through the 1.4-million-bpd Druzhba pipeline system.

“The issue will be resolved in due course, eased by commercial and government stock draws by Russia’s customers. One consequence could be a loss of confidence in the quality of the crude flows and thus a search, where feasible, for alternative supplies that could intensify price pressures for heavy/medium sour crude oil,” the IEA said.

The contamination issue with Russian oil pipeline supply will impact European refinery runs to the tune of 250,000 bpd in the second quarter, which is below 2 percent of Europe’s refined oil product demand, according to the International Energy Agency (IEA).

Last month, Russia halted supplies via the Druzhba oil pipeline to several European countries due to a contamination issue, which the Russians say was deliberate. Russian production has been curtailed because of the restricted exports via the Druzhba pipeline.

Hungary, Poland, and the Czech Republic were said earlier this month to be releasing a total of 8 million barrels from their respective strategic petroleum reserves to keep refineries operating after the contaminated crude oil forced the shutdown of the pipeline.

The oil was contaminated with organic chlorine, a substance used in oil production to boost output but dangerous in high amounts for refining equipment. The amounts of the chemical were found to be at levels much higher than the maximum allowable amount.

According to Russia’s energy ministry, normal deliveries via the pipeline are expected to resume in the second half of May.

Poland’s refiners PKN Orlen and Grupa Lotos said on Tuesday that they expected to start receiving in the coming days crude oil with normal quality via the Druzhba pipeline.

In its Oil Market Report on Wednesday, the IEA said that apart from the growing supply concerns in the Middle East, it is also monitoring the impact of the contamination of Russian crude oil passing through the 1.4-million-bpd Druzhba pipeline system.

“The issue will be resolved in due course, eased by commercial and government stock draws by Russia’s customers. One consequence could be a loss of confidence in the quality of the crude flows and thus a search, where feasible, for alternative supplies that could intensify price pressures for heavy/medium sour crude oil,” the IEA said.