Russian flows still in the spotlight

Ahead of meetings of Nato countries and a new EU summit, the US continues to press the EU for further sanctions against Russia, particularly in the energy field. By a disturbing coincidence, the Caspian Pipeline Consortium (whose main shareholder is Russian) has announced that necessary repairs to the pipeline that transports mainly oil from Kazakhstan to the Black Sea are expected to result in a drop in flows of around 1mb/d for several weeks. It should be noted that Kazakhstan has distanced itself from Moscow on the war in Ukraine and announced that it would not recognise the independence of the Donbass Republics. It should also be noted that the flows through this pipeline do not fall under the US embargo, because 90% of it is Kazakh oil. The Russian authorities had yesterday in a thinly veiled way threatened the EU to brutally stop their exports if new sanctions affecting energy were decided.

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In this context, oil prices remain under pressure: the price of Brent 1st-nearby is close to $117/b this morning but could quickly rise again. In the US, crude oil inventories fell by 4.3mb last week according to the American Petroleum Institute, with further declines in gasoline and diesel stocks. East Coast ports are seeing diesel cargoes leaving for Europe, which is facing an extremely tight situation, even though stocks are also very low in the US. This is the market segment that is most exposed to the risk of a total halt in Russian flows if it were to occur. ICE gasoil spread vs Brent, which was around $12/b before the war, has risen sharply and is now approaching $30/b.