Russia exercising it’s pricing power as a swing producer as well.

Lukoil Cuts German Oil Exports by Pipeline on Pricing (Update1)

by Torrey Clark and Thom Rose

(Bloomberg) OAO Lukoil, Russia’s largest independent oil producer, may cut March shipments of crude oil to Germany by pipeline, continuing the halt ordered yesterday because of a pricing dispute.

Lukoil stopped February exports through the Druzhba pipeline and will consider cutting March sales while demanding higher prices from traders in Germany, spokesman Dmitry Dolgov said by phone today. The Moscow-based oil producer has reserved space in the pipeline for next month, he said.

“Why should we sell oil cheap?” Dolgov said. “We have found alternatives.”

German refineries tapped fuel from alternative sources last year to supply their customers when Druzhba shipments fell as Lukoil and Sunimex Handels-GmbH, the dominant oil trader, clashed over prices in July and August. PCK Raffinerie GmbH in Schwedt said the disputes haven’t affected output.

“We haven’t had any problems or production cuts,” PCK Schwedt spokesman Karl-Heinz Schwelnus said today by telephone.

Lukoil will renew attempts to sell oil directly to the refineries, Dolgov said. The company isn’t breaking any contracts by cutting shipments and the refineries are unlikely to run short of crude, he said.

“German drivers have nothing to worry about,” Dolgov said.