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Ukraine says Russia cut its oil supplies

Russia has cut crude oil supply to Ukraine by nearly 25 percent in the first quarter, Kiev’s Energy Ministry said, a move linked by analysts and traders to tax and duty hikes by both governments on crude shipments.
/ Source: Reuters

Russia has cut crude oil supply to Ukraine by nearly 25 percent in the first quarter, Kiev’s Energy Ministry said, a move linked by analysts and traders to tax and duty hikes by both governments on crude shipments.

“The higher Russian crude export tax together with the Ukrainian VAT change was definitely an important factor,” said Andreas Wild, an analyst at Moscow’s BrokerCreditService.

Ukraine’s new pro-European leadership, elected last year in a fiercely divisive poll, levied 20 percent value added tax on crude deliveries in an attempt to stop the lucrative re-export of Russian crude.

Russia, for its part, has been steadily notching up crude export duties as oil prices rise. As of April 1, crude export duty had risen to $102.60 per tonne from a level of $83 in effect in March.

The sharp reduction in Ukrainian refinery throughput has contributed to a fuel oil price squeeze in the Mediterranean.

Traders of the heavy product operating in the Black Sea have said supplies from the region have dwindled in recent months, at the same time as refinery demand in the Mediterranean has risen.

“Russian domestic petroleum prices have heavily increased in recent months and sending crude to CIS (Commonwealth of Independent States) refineries has therefore become relatively less interesting. The Russian export tax does of course further strenghten that trend,” Wild said.

Ukrainian oil refinery throughput fell by 6.3 percent year on year in the first quarter of 2005, as Russian crude supplies fell by 23 percent, the Ukrainian Fuel and Energy ministry said on its web site.

During the first quarter, Ukrainian refineries processed 5.15 million tonnes of crude, a decline of 345,500 tonnes year on year, the ministry said.

The refineries received 4.39 million tonnes of Russian crude during the period, a decline of nearly 24 percent from the first quarter of last year.

Ukraine has little hydrocarbon wealth of its own. Refineries were supplied with 601,700 tonnes of crude independently, slight compensation for the decline in Russian supplies during the quarter.

During March alone, throughput was 1.94 million tonnes, 64,000 tonnes less than in March 2004. Total crude supplies to refiners stood at 1.93 million tonnes of oil, a 320,200 tonne decline from March of last year.

First quarter gasoline production declined by 61,200 tonnes, or 4.9 percent, 1.2 million tonnes; diesel output fell by 86,800 tonnes, or 5.7 percent, to 1.44 million tonnes and fuel oil by 138,600, or 6.9 percent, to 1.87 million tonnes.

Of March 2005 total, 1.71 million tonnes came from Russia.

Refinery stoppages totalled 57 days during the quarter, including 20 days at the Kherson refinery, owned by the Russian Alliance group, LUKOIL’s Odessa for 29 days, and the small Halychyna in western Ukraine for 8 days.

One Ukrainian refinery, TNK-BP’s Lysychansk plant, cut runs during the quarter, a spokeswoman for the oil company’s Ukrainian trading firm said earlier, citing analyst estimates of widespread run cuts.