Russian gasoline exports grew 37% YoY to 2.5 million tonnes from January to May, despite the Western sanctions.
However, after the Energy Ministry urged oil companies to divert sales to the domestic market in a bid to contain the soaring wholesale prices, average daily exports in the first week of June dropped by as much as 75% versus the last week of May. But this move had virtually no impact on prices.
Adding to the challenge was the spring turnaround season. Maintenance activities at many domestic refineries peaked in May, with refining output plunging to the year’s low of around 715,000 tonnes per day. Against this backdrop, gasoline trades on the St. Petersburg International Mercantile Exchange (SPIMEX) took a nosedive, while prices went up again. Another factor is the Government’s decision to cut subsidies for oil companies: April payments under the damping mechanism totaled RUB 107.2 billion, down from RUB 450.3 billion a year earlier,
with further cuts expected in September. This will throttle domestic fuel supplies and send prices even higher.
The rise in wholesale prices has affected prices at the pump, which couldn’t have gone unnoticed by regulators. In early June, the Federal Antimonopoly Service sent letters to nine oil companies demanding that they boost their exchange trades in AI-92 and AI-95 gasoline, which had dropped 7.9% from January to May, resulting in a backlog of demand that sent wholesale prices spiraling. Indeed, gasoline trades on the SPIMEX have reportedly dropped to 3.5 million tonnes in the first five months of 2023, down 9.5% from a year ago. Russia’s antitrust regulator also proposed raising the statutory requirement for gasoline sales on the commodity exchange by 1 p.p. to 13%
and opened a probe into a number of integrated oil companies. And the Energy Ministry, rather than imposing an outright ban, may recommend that producers trim back their gasoline exports.
Deputy Prime Minister Alexander Novak has instructed both the Energy Ministry and the Federal Antimonopoly Service to take measures to combat illegal oil product exports and develop a quota allocation mechanism for oil companies.
Russia’s fuel market is obviously going through hard times as it grapples with issues that may prompt a major regulatory revamp. So far, it remains an open question whether an equitable balance of interests will be maintained among producers, consumers and other stakeholders.