Oil plays an important role in the financial performance of Russian Railways (RZD). The OPEC+ deal has led to a reduction in the transportation of petroleum products, but they remain the most profitable cargo on the railways.

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Oil's Role in Russian Railways' Financial Performance Amid OPEC+ Agreement
04.08.2024
25

The loading of oil and petroleum products on the Russian Railways (RZhD) network decreased by 1.1% (to 104.4 million tons) in the first half of 2024, according to data from Russian Railways. A key factor was the OPEC+ deal, under which Russia agreed to the largest production cut in the last 18 months. From December 2022 to December 2023, production in Russia decreased by 300,000 barrels per day (bpd), and from December 2023 to May 2024, it fell by 330,000 bpd, reaching 9.20 million bpd (excluding gas condensate), according to the Energy Information Administration (EIA).

A decrease in the production of petroleum products also contributed to the reduction in loading on the RZhD network.

According to Rosstat, diesel fuel production in Russia decreased by 2.1% (to 35.9 million tons) in the first four months of 2024 compared to the same period in 2023, naphtha production (raw material for petrochemicals) dropped by 28.9% (to 3.5 million tons), and fuel oil production declined by 10.8% (to 15.9 million tons). Following the decrease in production, exports of petroleum products also fell. In December 2023, maritime petroleum product exports from Russia were 2.60 million bpd, while in May 2024, they were 2.13 million bpd, according to S&P Global Platts.

However, despite the reduction in loading, oil and petroleum products remain the second most important group of freight for rail transport in Russia. In the first half of 2024, the volume of loading for oil and petroleum products was second only to coal (169.2 million tons vs. 104.4 million tons for oil and petroleum products). Additionally, the transportation of hydrocarbon raw materials is more profitable.

For example, in 2022, the revenue rate of Russian Railways, reflecting the specific revenue per unit of distance for transporting different goods, was 948 kopecks per 10 ton-kilometers (kopecks/10 t-km), while for coal transport it was 281 kopecks/10 t-km (no later data is available).

As a result, the transportation of oil and petroleum products in the remaining months of the year will play a more significant role for the financial performance of Russian Railways compared to coal, the loading of which is also declining. In the first half of 2024, coal loading decreased by 5.5% (to 169.2 million tons) compared to the same period in 2023.

NOTE: OPEN OIL MARKET is the first independent B2B marketplace for petroleum products and raw materials. The company was founded in 2021 and now unites over 2,600 suppliers and buyers in the small wholesale market. In 2023, the marketplace's turnover was 5.9 billion rubles. The OPEN OIL MARKET platform is a resident of Skolkovo (VEB.RF Group).

Translated using ChatGPT

Sourse:  https://vgudok.com/eksperty/neft-igraet-vazhnuyu-rol-dlya-finansovyh-pokazateley-rzhd-sdelka-opek-pr.
#Oil Market #OPEC Deal #Russian Railways #RZD Financial Performance #Freight Transportation #Oil Prices #Economic Impact #Energy and Logistics #Global Energy Market #Rail Freight Trends #Fuel Costs #Transportation Economics
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