The six-month ban on gasoline exports came into effect in March, but it was suspended from May to July. The Ministry of Energy proposed extending the measure, and the government stated that it was necessary to maintain stability in the market.

The government extended the temporary ban on gasoline exports until December 31, 2024, as reported in the government's Telegram channel. It was initially introduced in March until August 31, but the measure was suspended between May and July due to the saturation of the fuel market.

Authorities explained that the decision to extend the ban was necessary to ensure stability in the fuel market during the ongoing seasonal demand and planned repairs at oil refineries. The restriction will not affect supplies under international intergovernmental agreements or fuel exported for personal use or international humanitarian aid.

The idea to extend the measure came from the Ministry of Energy. The proposal implied that the ban would effectively continue through September and October, and for the next two months, an embargo would be in place only for non-producers of petroleum products.

The previous temporary export ban on gasoline was introduced in September 2023.

Market Reaction to the Lifting and Return of the Embargo

In late May, the Ministry of Energy reported that stocks at oil refineries and fuel depots amounted to 2.1 million tons of automotive gasoline and 4 million tons of diesel fuel. The export ban was suspended from May 20, and shortly afterward, the ministry closed the statistics on gasoline production, citing concerns that its disclosure might lead to market manipulation by dishonest participants. Since then, the market has been able to rely only on official reports from the ministry and trading data from the St. Petersburg International Mercantile Exchange (SPIMEX).

Despite regular attacks on Russian refineries by Ukrainian drones since the beginning of 2024, the Ministry reported in July that the volume of fuel production was sufficient to meet demand. At the end of July, Deputy Minister Pavel Sorokin reassured that the situation with fuel production in Russia was stable, with the expected resumption of two refineries focused on producing AI-95 gasoline. In early August, the Ministry again reported sufficient supply and noted that gasoline shipments to the domestic market were 5% higher than last year, while diesel shipments were 8% higher. According to Reuters, in the first half of 2024, Russian refineries reduced oil refining by 4% compared to the same period last year, to 131.8 million tons.

According to SPIMEX data, during the 2.5 months when the export ban was suspended, gasoline prices rose by 10-30%. This increase in wholesale prices also accelerated retail prices. According to Rosstat data, the price of gasoline at gas stations increased for two consecutive weeks, exceeding the national inflation rate: from the beginning of the year until August 5, it rose by 5.5% while inflation was 4.99%. The return to the export embargo has not yet significantly impacted the situation, and the price of gasoline at the exchange has not experienced a sustained decline, instead showing a sideways trend.

The most acute situation concerns high-octane grades both in wholesale and retail, as their supply no longer matches demand. Experts say that while the share of AI-95 in total production is around 40-45%, it accounts for about 60% of consumption. As a result, the price difference between grades on the exchange currently reaches around 30%, and on July 24, AI-95 reached a record high for the year, hitting 75,296 rubles per ton, close to the historical record of 76,876 rubles per ton set last fall during the fuel crisis. Amid high wholesale prices for AI-95, the profitability of selling this grade at gas stations turned negative.

What the Extension of the Embargo Means for the Market

The return of the gasoline export ban in August did not lead to a significant cooling of wholesale prices, as "it is one of the peak months in terms of demand and refinery repairs," commented Dmitry Gusev, deputy chairman of the supervisory board of the "Reliable Partner" association, to RBC. "Therefore, the fact that prices are not rising further can already be called a victory. Accordingly, when September and October come, we will see a fairly active reduction in wholesale prices, as consumption will drop. And most importantly, gas stations will not increase their losses from retail fuel sales," the expert believes.

AI-95 gasoline is not accounted for in the calculations of the damping mechanism, which makes it difficult for the government to "manage" the rise in exchange prices for this type of fuel, notes Sergey Tereshkin, CEO of the Open Oil Market platform. Damping payments compensate for part of the difference between the government-established indicative price for the domestic wholesale market and the cost of export supplies. According to Tereshkin, oil companies "try to offset part of the arising costs by increasing exchange prices for AI-95."

"Therefore, the extension of the export ban is used as a 'stick,' although the previously introduced measures were sufficient to curb the rise in retail fuel prices. If, from July 16 to 22, retail gasoline prices increased by 0.6%, from July 23 to 29 by 0.4%, and from July 30 to August 5 by 0.3%, the latest weekly summary from Rosstat will likely show further slowdown in retail price growth," he predicts.

Nevertheless, extending the export embargo can be considered the right measure for the market, believes Gusev. "This year, the government has been using preventive measures to reduce tension in the wholesale oil product market, and accordingly, it has 'frozen' the status quo, prioritizing supply to the domestic market. If the domestic market becomes saturated and there is a need to load refineries, then the ban will be lifted," Gusev concludes.




Translated using ChatGPT

Sourse:  https://www.rbc.ru/business/14/08/2024/66bc6c419a7947d3212d8e5d