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. Last Updated: 07/27/2016

Oil Pipeline Fire Halts 20% of Export Supply

An oil leak and a fire on a pipeline in central Russia have halted one-fifth of supplies of the world's second-largest oil exporter to global markets on Wednesday for at least a few days.

Officials at Novorossiisk said oil flows had been halted on Wednesday morning and exports were unlikely to resume in the next three to four days.

"We had a phone call from Transneft, and we were told that repairs would take three to four days," an operator at the Black Sea port said. Transneft is the pipeline monopoly.

He also said the port was not loading because of bad weather conditions and was unlikely to resume operations before March 8.

A Transneft official confirmed an accident on a trunk pipeline running through the towns of Samara, Saratov, Tikhoretsk and Novorossiisk, saying the accident happened near the Volga town of Saratov. He declined further comment.

The Saratov region's emergencies ministry said on its web site that some 180 firefighters and 62 vehicles helped extinguish the fire in two hours on a territory of more than 2,000 square meters.

Novorossiisk had been due to export 840,000 barrels per day of oil in March out of Russia's total exports of around 4.3 million bpd.

Oil firms Surgut, Tatneft, TNK-BP and LUKoil had been due to load tankers between March 4 and 7.

The same pipeline supplies Ukraine's Lysychansk refinery, which belongs to TNK-BP, half owned by oil major BP.

It also partly ensures deliveries to the Ukrainian Black Sea ports of Odessa and Yuzhny, which are due to get more than 200,000 bpd of Russian crude for re-exports this month.

An official from Ukrainian pipeline monopoly Ukrtransnafta said Lysychansk was also cut off from Russian supplies but was hoping to get alternative deliveries from a pipeline running through the towns of Samara, Michurinsk and Kremenchug.

Sources at the ports of Odessa and Yuzhny also said Transneft had informed port authorities that it was working toward rerouting crude previously supplied via the now-damaged pipeline to the route via Michurinsk and Kremenchug.

Russia, the world's second-largest oil exporter after Saudi Arabia, sends over a quarter of its oil exports via the Black Sea ports of Novorossiisk, Odessa and Yuzhny. The rest goes via the Druzhba pipeline to Central Europe and the Baltic Sea port of Primorsk.

The drop in supplies from the Black Sea will likely further help narrow differentials between dated and Urals, already standing at minus $0.50 per barrel for the Mediterranean compared with minus $1.35 in the Baltics.

"Russian leaders want Urals to trade at a premium to Brent. Here you are," one trader with a Western major joked, referring to complaints by Prime Minister Vladimir Putin about the steep discount of Urals to other crudes.