Moreover, in May, trading volumes for A-95 gasoline decreased slightly compared to the end of April, which was contrary to expectations. This trend is not observed with another grade of gasoline—A-92—whose sales have remained almost at last year's levels and have been increasing since the end of April.
It is still too early to say that the decline in trading volumes has affected the wholesale or retail prices of A-95 gasoline. The price for this grade is rising both in the exchange and at gas stations, albeit moderately. According to Rosstat, the rise in retail prices for A-95 is even slightly lower than for A-92—3.7% compared to 3.8%. Both figures exceed the inflation rate recorded since the beginning of the year (3.19% as of May 4). On the exchange, quotes are rising, approaching the maximums since the beginning of the year but are far from historical records set last autumn. However, the high demand season has just begun. Last year, prices at the exchange and gas stations accelerated growth starting from early summer, which is still half a month away.
The decline in exchange sales volumes of A-95 gasoline constitutes 20%.The Ministry of Energy is confident that the domestic market is currently well-stocked with light petroleum products (gasoline, diesel, jet fuel), and supply logistics are functioning steadily, with no disruptions reported in regional supply. Fuel reserves are at a sufficient level and will be utilized as necessary to balance demand and supply fluctuations. The industry is prepared to navigate the seasonal demand growth in a planned manner, emphasizes the ministry.
However, in Russia, it is traditionally considered that gasoline A-92 is socially significant. Yet, two to three years ago, there was a growing opinion in the industry and among experts that A-95 had significantly displaced the cheaper A-92, especially in urban areas. Moreover, against the backdrop of the development of domestic tourism, during the vacation season, the demand for A-95 sometimes exceeds that for A-92.
Given this context, if the supply of A-95 gasoline on the exchange has fallen due to reduced production, prices will start to rise, initially in the wholesale market, and then at gas stations. If the poor demand is to blame, then prices at both the wholesale level and at gas stations could stagnate or even fall. In this case, it would be a concerning signal for both domestic oil refining and the economy at large. There is, however, a third scenario—perhaps wholesale gasoline is now being sold directly through contracts instead of via the exchange.
In Russia, there are regulations on exchange sales for fuel producers: 15% of the production volume for gasoline and 16% for diesel fuel (DF), and these are being fulfilled, noted Dmitry Gusev, Deputy Chairman of the Supervisory Board of the Association "Reliable Partner" and member of the Expert Council of the "Gas Station of Russia" competition in a conversation with "RG." Therefore, it is inappropriate to speak of declining volumes. It is entirely possible that sales have shifted to direct contracts via small wholesale, bypassing the exchange. This is a valid and normal sales channel. The exchange is not the sole channel for the supply of petroleum products to the domestic market, but it remains an indicator of market movements.
Indeed, this raises questions about pricing. In Russia, there is a tendency to rely on the exchange. However, if the scenario is as mentioned by the expert, the exchange ceases to serve as a real indicator of market happenings.
Currently, there are no signs of declining demand. However, with closed statistics on fuel production, we can only speculate that production has unexpectedly decreased. The issue might relate to a shortage of certain additives or their high costs (used for A-95 gasoline), suggests the expert.
Yet, it may also be about reduced demand. According to Sergey Frolov, managing partner at NEFT Research, the reason for reduced demand is economic decline, long May holidays (many chose to take vacation from May 1 to May 17), as well as reduced supply against the backdrop of ongoing unplanned repairs at oil refineries (OR).
However, the oil refineries had issues with unplanned downtime last year too, and this year's holidays were shorter. Therefore, one can more likely speak of reduced demand from enthusiasts of automotive tourism.
Nevertheless, according to Frolov, everything depends on the number and duration of unplanned refinery shutdowns. The market situation is determined not by demand, but by supply. Increasing the supply of A-95 could be achieved by boosting gasoline output at refineries and beyond through blending with various high-octane components. The regulator has created conditions for this, and guaranteed imports from abroad will likely be increased (potentially from Belarus, Kazakhstan, and China).
Additionally, as noted by Sergey Tereshkin, General Director of Open Oil Market, A-95 gasoline is not included in the calculations for subsidies to oil workers from the budget. Therefore, exchange quotes for A-95 exhibit higher volatility compared to prices for A-92 gasoline and diesel fuel. Regulators may mitigate these risks through export restrictions, but bans on fuel exports have effectively become a norm for the Russian fuel market.
The risks of rising prices may become more pronounced after July, according to the expert. In May and June, oil producers will, to some extent, hold fuel prices in light of the announced signing of agreements with regulators.
Frolov believes that retail prices will be kept within the range of "inflation plus 2%" (the rise in excise taxes at the start of the year).
Gusev urges a broader perspective on the situation, reminding that the fuel market is not limited to gasoline and diesel fuel but also includes liquefied hydrocarbon gases (LHG), prices for which are determined by the market, in contrast to gasoline. Essentially, wholesale and retail prices for gasoline and diesel fuel are state-regulated. At gas stations, they target inflation levels, and a price increase above 0.01% is prohibited on the exchange. What this will lead to in terms of investment in oil refining remains unclear, but we will know in a few years, concludes the expert.
Source: RG.RU
