Ust-Luga Opening Decreases Urals Flow Via Druzhba Link, IEA Says

Ust-Luga, Russia’s new port on the Baltic Sea, has shifted Urals crude flows away from the Druzhba export pipeline as seaborne routes have proved more profitable, the International Energy Agency said.

Exporters reduced supplies to Poland, the Czech Republic, Slovakia, Germany and Hungary after the price of Urals delivered through Russian pipeline operator OAO Transneft’s Druzhba link “collapsed” in April to $3 a barrel less than seaborne exports to northwest Europe, the Paris-based energy adviser said today in its monthly oil market report.

“The extra flexibility in the Transneft system which Ust- Luga affords appears to have been utilized to fulfill incremental demand and allow producers to orient their exports toward the most profitable outlets,” the IEA said.

Russian oil producers may continue to favor exports via tanker given sanctions on Iran, the agency said.

The Ust-Luga crude terminal opened in March and is the receiving point of Transneft’s 600,000 barrel-a-day Baltic Pipeline System-2, which bypasses transit nations Belarus and Ukraine.

To contact the reporter on this story: Jake Rudnitsky in Moscow at jrudnitsky@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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