Crude Oil Rises After Polish Pipeline Operator Detects Leak on Druzhba

By Geoffrey Smith 

Investing.com -- Crude oil prices rose by more than a dollar in early trade in Europe on Wednesday after Polish pipeline operator PERN said it had detected a leak on the biggest export pipeline out of Russia.

In a statement on its website, PERN said that its automation systems had detected a leak in the Przyjaźń stretch of the Druzhba pipeline, some 70 kilometers west of the town of Plock.

"This is the main route through which crude oil reaches Germany," PERN said, adding that it still hasn't established the cause of the incident. It immediately reduced flows through the damaged thread, which is one of two strands running along that route. The second strand is working normally it added.

The news will raise fears of further deliberate acts to cut the supply of Russian fuel to Europe, raising the pressure on the European Union's economy as the northern hemisphere's winter draws in.

By 02:45 ET (06:45 GMT), U.S. crude futures stood at $89.81 a barrel, just below their intraday high of $89.84 and up 0.5% from late on Tuesday in the U.S. Immediately before the news, it had been trading at $88.63 a barrel. By the same token, Brent futures rose 0.6% to $94.87 a barrel.

Prices subsided a little after Reuters quoted Poland's top official in charge of energy infrastructure, Mateusz Berger, as saying that the episode appears accidental, rather than the latest in a series of sinister mishaps on Europe's energy infrastructure which have all had the effect of cutting Russian energy supplies to the EU. Last month, explosions on the Nord Stream natural gas pipeline under the Baltic Sea effectively killed any chance of shipments through that link for the foreseeable future.

"Here we can talk about accidental damage," Berger said, adding that there are "no grounds to believe the leak was caused by sabotage."