Russia's pipeline monopoly Transneft asked oil trading companies to re-route crude oil from Lithuania to the Black Sea in August, due to insufficient capacity of the pipeline to the country. Reuters reports that traders were divided whether it was a sign of a blockade or a temporary technical issue after the leakage on the northern section of the Druzba pipeline.
Our view: Although both Lithuanian PM and PKN CEO sent positive messages to the market trying to assure people that it is a business issue and not about politics, concerns cannot be eased quickly given the current trend in Russian to use the "energy weapon" in the Kremilin's political games. We do remember that Russia cut supply of crude through Latvia’s huge 500kbd Ventspils terminal in 1998, when Russian politics wanted to punish the Baltic country in their dispute over Russian speaking minorities. The “official” explanation that time was also a leakage in one of the crude oil pipelines. We cannot rule out that Russia tries to demonstrate its power again, in order to force Lithuania and PKN to sell Mazeikiu to a Russian oil company. The news is definitely negative for PKN Orlen. Although the company hasn’t paid yet for Mazeikiu, it made significant efforts to acquire the company.