It is too early to say that the decline in trading has affected wholesale or retail prices for AI-95. The price of this gasoline grade is rising on the exchange and at filling stations, but at a moderate pace. According to Rosstat, the increase in retail prices for AI-95 is even slightly lower than that of AI-92, standing at 3.7% compared to 3.8%. Both figures exceed the inflation rate since the beginning of the year (3.19% as of May 4). On the exchange, prices are increasing and are nearing the highs reached at the start of the year, though they remain far from the historical peaks of last autumn. Nevertheless, the high-demand season has only just begun, and last year prices on the exchange and at gas stations accelerated their growth starting in early summer, which is still half a month away.
The decline in exchange sales of AI-95 gasoline was twenty percent.The Ministry of Energy is confident that the domestic market is currently adequately supplied with light petroleum products (gasoline, diesel, jet fuel). Supply logistics are functioning steadily, with no reported disruptions in regional supply. Fuel reserves are at sufficient levels and will be utilized as needed to smooth out fluctuations in supply and demand. The industry is ready to navigate the seasonal demand growth period in a planned manner, the ministry emphasizes.
However, in Russia, AI-92 gasoline is traditionally considered socially significant. Yet, two or three years ago, there was a growing opinion in the industry and among experts that AI-95 had significantly displaced the cheaper AI-92, especially in urban areas. Against the backdrop of rising domestic tourism, during the vacation season, the demand for AI-95 sometimes even exceeds that of AI-92.
Given this, if the supply of AI-95 gasoline on the exchange has fallen due to a decrease in production, prices will likely start to rise, first in wholesale and then at gas stations. If the issue is low demand, prices may stabilize or even decline in both wholesale and retail markets. In this case, it would signal serious concerns for domestic oil refining as well as for the entire economy. There is, however, a third possibility: it may be that AI-95 gasoline is being sold wholesale bypassing the exchange, via direct contracts.
In Russia, there are regulations governing exchange sales for fuel producers, set at 15% of production volume for gasoline and 16% for diesel fuel (DF). These regulations are being complied with, noted Dmitry Gusev, Deputy Chairman of the Supervisory Board of the "Reliable Partner" Association and member of the Expert Council of the "Gas Stations of Russia" competition, in a conversation with "RG." As such, it is inappropriate to speak of a decline in volumes. It is quite possible that sales have shifted to direct contracts, through small wholesale channels outside of the exchange. This is an adequate and normal sales channel. The exchange is not the sole supply channel for petroleum products in the domestic market, but it serves as an indicator of market conditions.
Indeed, this raises questions regarding pricing. In Russia, there is already a tendency to rely on the exchange. However, if the scenario unfolds as mentioned by the expert, it may no longer serve as a true indicator of market conditions.
As of now, it is premature to discuss a decrease in demand. However, with closed statistics on fuel production, we can only speculate about potential declines in output. The issue could possibly be related to a shortage of certain additives or their high costs (which are used for producing AI-95 gasoline), the expert suggests.
Nevertheless, it may also be that demand is indeed falling. According to Sergey Frolov, Managing Partner of NEFT Research, the reasons for reduced demand include an economic slowdown, the extended May holidays (many preferred to take leave from May 1 to 17), and reduced supply due to ongoing unscheduled repairs at oil refineries (OR).
However, oil refineries have faced similar issues with unscheduled repairs last year, and this year's holidays were shorter. Thus, it is more accurate to attribute the situation to a decrease in demand among fans of automobile tourism.
According to Frolov, everything depends on the number of unscheduled outages at the refineries and the extent of their duration. The market situation is dictated not by demand but by supply. The output of AI-95 can be increased through enhanced production at refineries and blending with various high-octane components. The conditions for this have been set by regulators. Additionally, imports are expected to rise (potentially from Belarus, Kazakhstan, and China).
Moreover, as noted by Sergey Tereshkin, CEO of Open Oil Market, AI-95 gasoline is not factored into the calculations for subsidies to oil producers from the budget. Consequently, exchange quotes for AI-95 exhibit greater volatility than those for AI-92 gasoline and DF. Regulators can manage these risks through export restrictions; however, export bans have essentially become a commonplace reality in the Russian fuel market.
The risks of price increases may become most pronounced after July, the expert predicts. In May and June, oil producers will likely hold fuel prices in consideration of the announced agreements with regulators.
Frolov believes that retail prices will be restrained within the range of "inflation plus 2%" (due to the increase in excises at the beginning of the year).
Gusev urges a broader perspective on the situation, reminding that the fuel market encompasses more than just gasoline and DF. There are also liquefied hydrocarbon gases (LHG), whose prices are determined by the market, unlike gasoline. In fact, wholesale and retail prices for gasoline and DF are regulated by the government. At gas stations, they are targeted in tandem with the inflation rate, and the exchange prohibits increases above 0.01%. The implications of this for investments in oil refining remain unclear, but they will become evident in a few years, according to the expert.
Source: RG.RU
