Russia blocks pipeline crude flows to Poland

Front-month ICE Brent has moved up by $0.59/bbl on the day from Friday, to $83.55/bbl at 09.00 GMT.

PHOTO: Crude oil pump jacks. Getty Images

Upward pressure:

Russia has stopped crude flows through the Druzhba pipeline’s northern branch to Poland, PKN Orlen’s chief executive Daniel Obajtek tweeted on Saturday. Russian oil accounts for 10% of Poland’s total crude imports, and the company has implemented measures to ensure steady supplies, Obajtek added.

Poland has reiterated that it aims to completely phase out Russian oil imports. The country has sharply reduced its reliance on Russian crude, which accounted for nearly all of Poland's crude imports in 2015, Obajtek stated.

Crude flows from Russia via pipelines are exempted from the EU embargo imposed on Russian crude imports. Meanwhile, Russia claims that NATO members are supplying arms and ammunition to Ukraine via Poland.

Downward pressure:

Crude prices have been trading rangebound since last December, BB Energy’s global derivative head Omar Najia said at a webinar organised by Gulf Intelligence today. He thinks that Brent has more downside potential, partly due to expectations of slower global economic growth and the US Federal Reserve indicating that its willing to make more interest rate hikes.

Interest rate hikes typically push the US dollar up and make Brent and other commodities in dollars more expensive for buyers.

The EU is unlikely to face any oil and gas shortages in 2023, Eurasia Group’s director Henning Gloystein said. With steady natural gas imports coming from US and third countries, the EU should fill at least 65% of its gas storage facilities, enough to cater to the demand for about eight months during winters, Gloystein added. But he simultaneously cautioned that economic “stagflation” could dent demand for energy products in the EU.

Najia argues that despite the EU replacing its Russian gas and oil imports from countries such as the US or India, the total import cost will be way higher and could lead to higher inflation levels.  

By Nithin Chandran

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