Russian oil companies still fail to increase oil refining in August

Russian oil companies have not yet been able to increase oil refining in August. So, for the first third of the month, the refinery delivered an average of 765 thousand tons per day, in July it was slightly more – 769 thousand tons per day. In the context of rising oil prices and weakening of the ruble, the cost of fuel stays at the price at which the damper is reset for the whole month. It is possible that companies will have to increase processing and supply to the stock exchange in the second half of August in order to avoid losing the damper.

Oil refining in Russia for the nine days of August remains at the level of July. Thus, according to Kommersant’s sources familiar with the statistics, Russian refineries delivered 764.5 thousand tons of oil per day for processing this month against 769.1 thousand tons in July. It is beneficial for oil companies to maintain a high level of oil refining in the face of record wholesale prices for petroleum products in the Russian Federation, as well as expectations for the payment of this year’s maximum damper subsidies in August. The damper should rise sharply this month due to the devaluation of the ruble and an increase in oil prices, while already in September it will be halved due to changes in legislation.

It was assumed that maintaining a high level of refining would allow Russian oil companies not to reduce oil production in the Russian Federation due to the announced reduction in exports by 500,000 barrels per day in August. Offshore oil exports remain at 3.1 million b/d, according to Kpler. Russia no longer discloses official data on its oil production.

The exchange price of AI-92 gasoline in August is close to the cut-off price of 62.59 thousand rubles. per ton, above which (on average per month) the damper is reset to zero. On some days of the month, the cost of fuel has already exceeded this limit, so if prices do not fall, oil companies face a real threat of losing multi-billion dollar damper payments for August.

There have not yet been such cases in practice, but a number of Kommersant’s interlocutors consider such a development of events to be probable. One of the interlocutors suggests that in the second half of August, the oil companies will increase the processing and supply of gasoline to the stock exchange in order to “cool down a little” the cost of fuel, which is not far from the cut-off price.

According to the SPIMEX, on August 11, the cost of AI-92 decreased by 0.34%, to 62.24 thousand rubles. per ton. The cost of diesel fuel again set a record value, having risen in price by 1.7%, to 64.3 thousand rubles. per ton.

The situation with rising fuel prices may worsen in September, when demand will still be high, and refineries will begin large-scale repairs. Despite the fact that regulators are unhappy with rising fuel prices, so far no drastic measures have been taken to prevent a rise in prices, although various options for limiting gasoline exports were discussed during the summer.

At the same time, gasoline prices at gas stations are rising every week, and their growth already exceeds the rate of inflation. “Motor fuel prices are market prices, so they fluctuate at certain moments,” the Ministry of Energy believes.

Primary processing of raw materials in July and August 2023 is slightly higher than a year ago. However, the production of gasoline in recent months, as well as its shipment to the domestic market, is significantly behind last year’s levels, recalls Mikhail Turukalov, an expert on the fuel market. He notes that this is also due to the high efficiency of exports of oil products from Russia.

According to Mr. Turukalov, last summer there were significant problems with the export of petroleum products, but at the end of 2022 they were resolved. He notes that a number of refurbishments were scheduled for August 2023, but some work was pushed back to help maintain the high throughput in August.

In September, the situation on the market may worsen due to maintenance work at the refinery, Mikhail Turukalov believes. In September, more repairs are expected at the plants of Rosneft, LUKOIL and a number of smaller refiners, the situation is aggravated due to delays in the completion of repairs at the Astrakhan GPP and the Surgut ZSK of Gazprom.

Dmitry Kozlov