Podopny gasoline – Newspaper Kommersant No. 42 (7487) dated 03/14/2023

Wholesale fuel prices, which returned to the peak of the summer of 2022 after a month of strong growth, moved to a sharp fall. Over the past two trading days, quotations of the main types of oil products have decreased by almost 10%, which market participants attribute to excessive previous growth and the “crowd effect”. However, the correction may be limited due to refineries leaving for scheduled repairs and damper cuts since April.

Wholesale fuel prices on the Russian market reversed sharply at the end of last week and are intensifying their decline after a month of continuous growth. On the SPIMEX exchange, AI-92 gasoline fell in price on March 13 by 6.4%, to 44.7 thousand rubles. per ton. At the same time, in relation to the peak value reached on March 9, the price fell by almost 9.5%. Gasoline AI-95 fell in price on the stock exchange by 4.2%, to 49.1 thousand rubles. per ton, and to the same level – summer diesel fuel (decrease by 1.65%).

Over the past four weeks, wholesale gasoline prices have been growing rapidly despite a surplus in the domestic market and the European embargo on fuel imports from the Russian Federation that came into force on February 5. For four weeks by March 9, quotes jumped by almost 38%.

The main reason for the increase in gasoline prices was that the price ceiling for petroleum products, set by the West, apparently did little to hinder their export, moreover, the export netback grew against the background of the weakening of the ruble.

In addition, market participants began to actively purchase fuel against the backdrop of a reduction in damper payments to oil companies since April (see “Kommersant” dated March 7).

As Mikhail Turukalov, head of Commodity Markets Analytics, notes, there were fundamental reasons for the rise in prices for gasoline and diesel fuel. In addition to the high volumes of exports of petroleum products, oil companies have been replenishing the stocks of their marketing structures since March, he notes. In addition, the expert points out, the effect of a low base worked, as the quotes jumped from the minimum levels of late February. “The purchase of exchange volumes was supported by the maintenance of a high margin at gas stations, which was gradually reduced by rising prices. But gas stations remained in the black even with a more expensive resource, ”says the expert.

But after that, a number of factors caused a stop in the growth of quotations. Thus, increased prices broke away from netbacks, taking into account the damper, which made buyers doubt the expediency of further purchases. According to Mr. Turukalov, in such a situation, it will be more profitable for oil companies to supply the April volumes of diesel fuel to the domestic market, and not for export.

Exceeding the export parity for diesel fuel, together with the release of AI-92 quotations to the highs of last summer, became a signal for the market to correct prices. In addition, market participants say that last week the Ministry of Energy criticized oil companies because of rising prices on the stock exchange, which is likely to force them to increase supply. Active sales of winter diesel fuel residues against the backdrop of a seasonal reduction in demand for it may also have a positive impact on the cost of diesel fuel.

At the same time, the situation with gasoline is complicated by a significant reduction in damper compensation since April, Mikhail Turukalov notes. This, in his opinion, leaves no chance for parity between domestic prices and exports, and without this, the interest of oil companies in shipping goods to the Russian market will not increase.

Additional problems with the supply will be created by spring repairs at the refinery, which, according to Kommersant’s sources, may be delayed due to difficulties with the supply of components and equipment due to sanctions.

On the other hand, the expert says, it is not clear how strong the demand for gasoline will be in the next holiday season – it may turn out to be weaker than last year, against the backdrop of an increase in the availability of international flights.

In general, Mr. Turukalov believes, the acceleration and the subsequent collapse in gasoline prices are an illustration of the “psychology of the crowd.” In the last two or three weeks, neither the gasoline stocks of oil companies, nor the volumes of rail shipments of goods to independent oil depots have changed significantly, he notes. “The only difference is that earlier everyone needed gasoline, but now demand has disappeared in anticipation of a new price bottom, and until this bottom is reached, no one needs the product,” the expert explains. In his opinion, in the situation with diesel fuel, a possible decrease in its supply on the stock exchange may lead to an increase in the activity of buyers in the coming days. In the coming weeks, the expert expects fluctuations in quotations, which will depend on the actions of the authorities against the backdrop of starting repairs at the refinery, as well as on the state of domestic demand.

Olga Mordyushenko