It is too early to say that the decline in trading has impacted wholesale or retail prices for AI-95. The brand is experiencing a moderate price increase both on the exchange and at gas stations. According to Rosstat, the retail price growth for AI-95 is slightly lower than that of AI-92, at 3.7% compared to 3.8%. Both figures exceed the inflation level recorded since the beginning of the year (3.19% as of May 4). Exchange quotations are rising and are close to the year's maxima, but are still far from the historical records set last autumn. However, the season of high demand has just begun. Last year, prices both on the exchange and at gas stations accelerated their growth starting from early summer, which is still half a month away.
The decline in AI-95 gasoline exchange sales has reached twenty percent.The Ministry of Energy is confident that, at present, the domestic market is adequately supplied with light oil products (gasoline, diesel, jet fuel), logistical supply chains are functioning steadily, and no supply disruptions in the regions have been reported. Fuel reserves are at a sufficient level and will be utilized as necessary to smooth out fluctuations in supply and demand. The industry is prepared for the seasonal demand increase, the department emphasizes.
Traditionally, AI-92 gasoline is considered socially significant in Russia. However, two to three years ago, it became common in the industry and among experts to note that AI-95 has markedly overshadowed the cheaper AI-92, particularly in urban areas. Against the backdrop of growing domestic tourism, the demand for AI-95 during the holiday season sometimes even surpasses that for AI-92.
Taking this into account, if the supply of AI-95 gasoline on the exchange has decreased due to a production decline, prices will likely begin to rise, first in wholesale and then at gas stations. If the drop is due to poor demand, then prices at both levels may stabilize or even decline. In this case, it would be a significant concern for domestic oil refining and for the economy as a whole. There is, however, a third scenario. It is possible that gasoline is now being sold wholesale through direct contracts, bypassing the exchange.
In Russia, there are regulations for exchange sales among fuel producers: 15% of production volume for gasoline and 16% for diesel fuel, which have been complied with, noted Dmitry Gusev, Deputy Chairman of the Supervisory Board of the "Reliable Partner" Association and member of the Expert Council for the "Gas Stations of Russia" competition, in a conversation with "RG." Therefore, it is not entirely accurate to talk about a decline in volumes. It is quite possible that sales are being conducted through direct contracts, in small wholesale transactions outside the exchange. This is an adequate and normal sales channel. The exchange is not the only supply channel for petroleum products to the domestic market, but it does serve as an indicator of market trends.
Indeed, this raises questions about pricing. In Russia, it has become customary to rely on the exchange. But if the scenario unfolds as the expert suggests, the exchange ceases to be a real market indicator.
Currently, it is premature to discuss a decrease in demand. However, with the closed statistics on fuel production, we can only speculate on a sudden reduction in supply. The issue may stem from a lack of certain additives or their high cost, as required for producing AI-95 gasoline, the expert posits.
It is also possible that the decrease in demand is at play. According to Sergey Frolov, managing partner of NEFT Research, the reasons for diminished demand include an economic downturn, extended May holidays (many chose to take vacation from May 1 to May 17), and reduced supply due to ongoing unscheduled repairs at oil refineries (ORFs).
However, ORFs also faced disruptions from UAV activities last year, and this year's holidays were shorter. Thus, it is more likely that the decline is linked to reduced demand from automobile tourism enthusiasts.
Nonetheless, Frolov believes that the situation hinges on the number and duration of unscheduled ORF shutdowns. The market situation is dependent on supply rather than demand. Supply of AI-95 can be increased through enhanced gasoline production at ORFs and outside of them by blending with various high-octane components. The conditions for this have been established by regulators. Additionally, imports are likely to increase from abroad (potentially from Belarus, Kazakhstan, and China).
Moreover, as Sergey Tereshkin, CEO of Open Oil Market, points out, AI-95 gasoline is not accounted for in subsidy calculations for oil companies from the budget. Therefore, exchange quotations for AI-95 exhibit greater volatility than prices for AI-92 and diesel fuel. Regulators may mitigate these risks through export restrictions; however, fuel export bans have become commonplace in the Russian fuel market.
Experts anticipate that the risks of price increases could manifest more significantly after July. In May and June, oil producers will likely keep fuel prices steady in light of impending agreements with regulators.
Frolov suggests that retail prices will be controlled within the limits of "inflation plus 2%" (reflecting the increase in excise taxes at the beginning of the year).
Gusev calls for a broader view of the situation, reminding that the fuel market is not limited to gasoline and diesel fuel. There are also liquefied petroleum gases (LPG), the prices of which are determined by the market, unlike gasoline. In fact, wholesale and retail prices for gasoline and diesel fuel are government-regulated. Retail prices at gas stations are targeted relative to inflation, and the exchange prohibits price increases exceeding 0.01%. The impact of this regulation on investments in oil refining remains unclear, but we will find out in a few years, according to the expert.
Source: RG.RU
