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Russian oil supplies to EU via southern Druzhba to rise 16% in June – sources

Russia’s piped supply of Urals crude to the European Union (EU) via the southern Druzhba pipeline in June is set to increase by 16% compared to May as EU refiners seek to secure more oil amid fears of disruptions in transit via Ukraine, two sources said.

Russian pipeline oil supplies to Europe are excluded from an EU embargo, but the route crosses Ukraine and has been under constant risk of disruptions since Russia sent thousands of troops into Ukraine last year in what Moscow calls a “special military operation”.

The southern branch of the Druzhba pipeline supplies Hungary, Slovakia and the Czech Republic.

Hungary’s MOL, the main buyer of Urals crude in Hungary and Slovakia, is expected to purchase about 900,000 tonnes of Urals oil via Druzhba in June, up from 750,000 tonnes in May, the sources familiar with the matter told Reuters.

“Recent escalation in Ukraine, damages to big infrastructural objects (are a) worry … it is a good idea to order more now,” one of the sources said, referring in particular to this week’s destruction of the Kakhovka hydroelectric dam.

Russia and Ukraine blame each other for the incident.

The Czech Republic’s Unipetrol refiner – the country’s sole buyer which is owned by Poland’s PKN Orlen PKN.WA – will purchase up to 430,000 tonnes of Urals in June, versus 400,000 tonnes purchased in May, the sources said.

“Crude oil continues to arrive uninterruptedly to Hungary via the Druzhba pipeline and we do not expect delays during the upcoming months”, a MOL media representative said, but declined to comment on monthly purchases.

PKN Orlen also said it never comments on oil purchases and contractual details.

The EU imposed an embargo on Russian oil purchases via maritime routes from December. Hungary, Slovakia and Czech Repubic were, however, allowed to continue Russian oil imports as critical feedstock. It would be difficult for them to secure enough oil for their refineries if Druzhba is suspended.

Oil supplies via a section of the southern Druzhba pipeline were temporarily suspended in November following shelling on a power station which provides electricity for a pump station.

Parts of the pipeline have also been attacked by drones inland in Russia, according to Russian reports, but the attacks did not cause significant supply disruptions.

The Druzhba pipeline crosses Belarus and Ukraine and remains an income source for both countries which receive transit fees. Kiev and Minsk asked for significant hikes in transit tariffs, making the route less convenient for European buyers that pay for transport.

A MOL media representative told Reuters that the company “continues to procure crude oil via both the Druzhba and Adria pipelines despite the transit fees being significantly higher compared to reasonable market prices”.

MOL started to make payments to Ukrtransnafta for transit directly amid issues on Russian Transneft payments to Ukrainian pipeline operator.
Source: Reuters (Reporting by Reuters; Editing by Emelia Sithole-Matarise)

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