Moscow –– Exports of Russian Urals oil via the Druzhba pipeline are likely to fall in the first quarter as sellers have been pressing for higher crude prices that margin-strapped refiners cannot afford, five trade sources told Reuters on Tuesday.
The Soviet-built Druzhba pipeline, whose name means Friendship in Russian, has capacity to pump 1 million barrels per day (bpd) and links Russian fields to European refineries.
Falling seaborne transportation costs for Russian flagship Urals crude has made exports via the Druzhba pipeline to Europe less profitable compared to shipments from ports.
“Sellers ask for a price increase as seaborne exports have become more profitable but European refiners suffer from weak margins and are not ready to take on additional costs,” one of the sources said.
Russian companies could divert almost 1 million tonnes (7.33 million barrels) of Urals from the pipeline to Baltic ports in January, the source said.
Urals oil loadings from Russia’s Western ports were close to historical lows this year amid output cuts by OPEC+, a group of producers that includes Russia and the Organization of the Petroleum Exporting Countries.
Surgutneftegaz, a major supplier of crude to Germany via the pipeline, plans to cut oil supplies by a third to about 400,000 tonnes in January-March, sources said.
Gazprom Neft, which also supplies German refiners, was also considering cutting pipeline supplies, they said
Both firms could redirect oil exports to Baltic ports, the sources added.
Poland’s refiners PKN Orlen and Grupa Lotos have been involved in tough negotiations with Rosneft, traders said, which could lead to supply cuts next year.
Rosneft, Gazprom Neft, Surgutneftegaz and PKN Orlen did not immediately respond to a request for comment. Lotos declined to comment.
(Additional reporting by Agnieszka Barteczko; Writing by Olga Yagova; Editing by Vladimir Soldatkin and Edmund Blair)