Kazakhstan attempts to quell fears over crude loading after Novorossiisk port attack

Kazakhstan tried to calm fears over the stability of crude loading at the Black Sea port of Novorossiisk, after an uptick in attacks left market participants questioning whether cargoes can be reliably exported from the region.

Kazakhstan's Minister of Energy, Almasadam Satkaliyev, on Aug. 8 said that the country is willing to put forward proposals to ensure the safe operation of the Novorossiisk port.

"Kazakhstan will take the initiative at the political level to ensure the stable operation of this port, based on the fact that the beneficiaries of the operation of the oil terminal are major world consumers, including those from the European Union," the minister said, according to a report by Russian news agency Tass.

"I think that this work should be organized through intergovernmental dialogue, through diplomatic channels. And the Prime Minister of the Republic of Kazakhstan has already given the corresponding instruction," he added.

The announcement comes after a Russian tanker carrying fuel oil was attacked in the Black Sea near Crimea on Aug. 5, impacting commodities infrastructure stemming from Moscow's invasion of Ukraine.

There has been an uptick in attacks in Southern Russia since it exited the Black Sea Grain Initiative on July 17, threatening shipping of commodities including oil and grain via the Black Sea -- a key export and transit route.

The Aug. 5 incident came after sea traffic at the Russian Black Sea port of Novorossiisk was temporarily suspended following an attack on a naval vessel nearby.

Novorossiisk is a major export terminus for CPC Blend crude and typically loads around 1.5 million b/d of the Kazakh crude, according to S&P Global Commodities at Sea data.

"CPC is equipped with the necessary volume of capacities related to the possibility of storing oil, as well as the corresponding tanks, tanks are provided on the basis of oil senders. The stable operation of the pipeline is ensured through timely repairs and investments," the minister said.

Higher insurance costs?

Traders in the Mediterranean are anticipating higher cargo insurance costs stemming from the increased risk of transporting oil through the Black Sea.

"Cargo insurance could be expensive," one trader said. "Additional war risk premium [AWRP] is going to jump up on back of recent events in black sea as well... it might be up 50-80%."

Mixed views emerged over whether Mediterranean crude oil buyers will be incentivized to turn away from CPC Blend as a result of the higher associated transport risk.

"The increasing risk of black sea loadings may also lead refiners to switch to alternative grades that load outside Black Sea area," a second trader said.

"I guess yes, people could switch away from CPC but there's a lot of ifs in that statement," a third trader countered. "Depends on the avails and I don't see other grades trading at levels that compete."

Platts, part of S&P Global, assessed CPC Blend at a $1/b discount to Dated Brent on Aug. 7, unchanged on the day.