TOPLINE
Ukraine’s suspension of Russian oil to Eastern Europe sent oil prices soaring Tuesday morning, after Russian oil company Transneft announced Ukraine had not received transfer fees for the oil for nearly a week due to Western sanctions, renewing fears of supply shortages.
KEY FACTS
Brent Crude Oil shot up 1.13% Tuesday morning, hitting $97.78 per barrel, while West Texas Intermediate increased 1.3%, to $92.06, following the announcement from Transneft, Russia’s pipeline monopoly.
Transneft wrote in a statement obtained by Reuters that it had paid a transfer fee to Ukraine, but the money was returned because of European Union sanctions against Russia for its ongoing invasion of Ukraine.
Ukraine’s decision to halt Russian oil affects the southern leg of the Druzhba pipeline, which feeds Hungary, Slovakia and the Czech Republic, according to Transneft.
Hungary’s oil reserves now sit at 28.6 million barrels, leaving it with enough oil for one year of consumption, while the Czech Republic has 15 million barrels (less than a year) and Slovakia has 9 million barrels in reserves (less than a year), according to the site Worldometer.
The Czech Republic imported 3,417 kilotons (2.2 million barrels) of Russian oil in 2021, more than it imported from any other country, according to Czech Ministry of Industry and Trade.
KEY BACKGROUND
The news came amid a steady two-month decline in gas prices, which had momentarily assuaged fears of a pending recession in Europe (Brent crude prices had been declining since it hit a $123.58 peak on June 22). The European Union has also been embracing a potential energy shortage as Russia threatens to cut off oil and gas supplies to the West. Speaking to member countries in a conference last month, European Union Commission President Ursula von der Leyen pushed for a 15% cut in gas use through March, in response to a shutoff of Russian gas — which she called a “likely scenario.” The plea came a week after Russia shut down the Nord Stream I pipeline for maintenance, sparking fears a routine measure could be prolonged into a long-term closure in response to Western sanctions. The pipeline has since been restarted. In June, the EU adopted a round of sanctions (the sixth overall) targeted at Russian oil, with embargoes starting Dec. 5 on crude oil, and Feb. 5, 2023 on petroleum products — with an exemption from oil imported via pipeline.
TANGENT
On Monday, the European Union released a final draft to revive a 2015 nuclear deal with Iran, in hopes of restoring Iranian crude exports to 2018 levels, when former United States President Donald Trump reneged on the deal.
BIG NUMBER
250,000. That’s how many barrels of oil Russia typically supplies through the southern leg of the Druzhba pipeline per day, Reuters reported.
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