Kazakh oil producers, which export crude via the Caspian pipeline consortium (CPC), are seeking to divert flows to Russia's Transneft from May in an attempt to minimize losses as CPC Blend margins and demand fall, five market sources said.
In the past, the CPC export route provided the most attractive margin for Kazakh companies, but demand and prices for CPC Blend have been hit by Arab oil inflow and weak European fuel demand more than other regional grades, traders said.
CPC pipeline and Transneft didn’t respond to Reuters requests for comment. TCO, KPO, KMG and the Kazakh energy ministry declined to comment.CPC Blend is the flagship Kazakh crude oil export blend sourced mainly from Tengiz, Karachaganak and Kashagan oil fields under production sharing agreements with foreign shareholders as key investors.
A recent inflow of crude oil from Saudi Arabia, slashed official selling prices for April and May volumes and evaporating fuel demand in Europe due to lockdowns to curb the spread of COVID-19 tipped CPC Blend differentials into freefall, traders said.
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