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Tainted Russian Oil Crisis May Drag On For Months

Tainted Russian Oil Crisis May Drag On For Months

Crude Oil

It’s been a month since Russian oil flows through the Druzhba pipeline were suspended due to contamination, and despite Russia’s assurances that clean oil will resume flowing through the pipeline westward to Europe in the second half of May, analysts and traders say the progress is very slow while costs could be very high.

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

Refineries in Belarus, Poland, Hungary, Slovakia, the Czech Republic, and Germany have been impacted by the contamination issue as clean Russian oil is not flowing normally yet, while Western refiners and Russian companies are in a dispute over who’s paying for the clean-up and when.

Western oil traders tell Bloomberg’s Javier Blas that the contamination issue and the subsequent clean-up, blending of dirty oil, and restart of normal deliveries via the pipeline will be much costlier than initial estimates and could take much longer than anticipated.

The cost could be as high as US$1 billion, according to traders and executives at refiners in Moscow, Geneva, and London, who spoke to Bloomberg. Traders also believe that the contaminated oil volume could be as high as 40 million barrels, double the 20 million barrels that Russian officials are claiming

Earlier this week, Russia said that it is already sending clean within-standards crude oil via the Druzhba pipeline toward Hungary and Slovakia, with first clean oil expected to arrive at the metering stations in those countries within a week.

A spokeswoman for Czech pipeline operator Mero told Reuters on Friday that clean Russian oil via the pipeline is expected to reach the Czech Republic on Monday afternoon. Russian oil reached Slovakia on Wednesday evening.

The now month-long suspension of Russian oil supply to several European countries comes as global supply outages mount with Venezuela and Iran, and with increasing supply disruption risks in Libya and the Middle East.  

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