Russia, after gas, the oil threat

A Russian judge in the city of Novorossiysk on the Black Sea coast ordered the Caspian Pipeline Consortium to suspend shipments for 30 days.
Although the facility is in Russia, about 90% of the crude that passes through comes from Kazakhstan. The CPC shutdown will remove up to 1.5 million barrels per day of much-needed crude from the global oil market, while barely reducing Russia’s own flows.

Up to two-thirds of CPC Blend exports typically end up in Europe, with significant volumes headed to Central Europe via pipelines from the Italian port of Trieste. The impact on the Mediterranean crude market, where supply has already been the tightest in years, will be severe.

Combined monthly exports from Azerbaijan, Kazakhstan, Libya, the North Sea and West Africa, all major suppliers to Europe, fell by more than a million barrels per day in June.

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 due to hear the company’s appeal against the ruling. This gives hope that the disruptions can be avoided, but there is no guarantee that CPC’s appeal will be successful.

Even if the ban is reversed, Russia has sent a clear warning to Europe that it can disrupt crude flows almost at will and is prepared to inflict extreme economic damage on its neighbors in the process.

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