Russian Roulette for Refiners

3 May 2019: Last week, reports surfaced that Russian Urals crude flowing through the Druzhba pipeline was contaminated with organic chloride.   Refiners in Germany, Poland, Belarus, Hungary, the Czech Republic and Slovakia all stopped accepting supplies of Russian Urals crude.  Official numbers have not been released, but analysts estimate that at least 35 million barrels of oil have been contaminated.  Landlocked, domestic refiners In Poland, Hungary and the Czech Republic have no alternative source of crude oil supply and are tapping into their countries’ strategic petroleum reserves as a result.  In other countries, refiners are scrambling for replacement barrels.  Urals is a medium-heavy crude with a relatively high sulphur content.  Sanctions on Iran and Venezuela as well as lower output from Mexico has already reduced worldwide availability of these types of crudes and oil prices have traded up as a result.  Non-contaminated cargoes of Urals exported from the port of Primorsk in the Baltic Sea are in short supply and as a result command a significant premium.  In this Weekly Tanker Opinion, we will discuss the potential impact of these events on the tanker market.

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