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June prices for Russian flagship Urals crude via the Druzhba pipeline through Ukraine are set to jump by 16% over May’s prices due to European refiners’ concerns of transit disruptions following the collapse of a major Ukrainian dam and fears of more significant infrastructure damage, Reuters reports, citing two unnamed sources.
While Russian seaborne oil is banned by sanctions, piped crude is not, with the Druzhba pipeline running through Ukraine and supplying Hungary, Slovak and the Czech Republic from the southern branch.
Reuters cited an unnamed source as saying that European Union refiners were seeking to stock up on fears of attacks on key infrastructure, viewing an escalating situation in Russia’s war on Ukraine.
Hungary’s MOL, a key buyer of piped Urals, is set to purchase 900,000 tonnes of Druzhba Urals in June, compared to only 750,000 tonnes in May, sources told Reuters.
The uptick in purchases comes after the collapse of the Nova Kakhovka dam after a massive explosion. The dam is located on the Dnieper River, requiring the evacuation of residents in both Ukrainian and Russian-held territory.
Russian President Vladimir Putin on Wednesday blamed the destruction of the dam on Ukraine, denying any involvement and describing the move as a “barbaric act”. Ukraine blamed Moscow for blowing up the dam, describing the alleged attack as “ecocide”.
Tens of thousands of people are in need of evacuation and at risk of severe flooding, water shortages and power cuts.
The dam collapse follows numerous attacks targeting Ukrainian energy infrastructure and also coincides with the launch of a major Ukrainian counteroffensive against Russian positions, leaving analysts to consider who would have benefited most from the destruction of the dam.
An escalation of attacks on both sides puts piped oil supplies at risk.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com