Business | Oil & Gas
Russian refiners aim to tap home market's higher prices
Some of Russia's largest fuel exporters are redirecting export volumes to the domestic market in a rush to cash in on high prices at home while recession fears drive a downturn on international oil markets.
- Reuters
- Published: 00:04 January 25, 2008
Moscow: Some of Russia's largest fuel exporters are redirecting export volumes to the domestic market in a rush to cash in on high prices at home while recession fears drive a downturn on international oil markets.
Prices for light products as well as heavy fuel oil remain relatively high in Russia, while gas oil futures, the benchmark for cash trade in Europe, hit a three month low this week, and Europe's fuel oil benchmark in recent weeks has traded near its deepest discount to crude oil in about a year.
On an outright basis, the seven day moving average for heating oil with 0.2 per cent sulphur, the main benchmark for Russian gas oil in northern Europe, is running near $740, while the fuel oil average stands at $409.14.
According to Reuters data, diesel prices averaged 17,750 roubles ($713.1) per tonne last Friday, down one per cent from the previous week, while fuel oil was high for the season, at 6,475 roubles ($260.1) per tonne, down from 6,955.
International pressure
Traders say Russian prices will eventually succumb to international pressure soon as export volumes stay in the country and the peak winter heating period passes. Export duty will also rise in February.
From the crude oil side, lower February domestic prices on barrels for February delivery are expected to tug product prices down in the coming weeks, spurring the rush to make sales on the domestic market.
Among the sellers, the 336,000 barrels per day Kirishi refinery near St Petersburg, which normally exports 90 per cent of its fuel oil to northwest Europ va the Baltic, surprised traders by offering spot cargoes to the local market for the first time in memory.
Kirishi has been known to offer fuel oil locally, but the price is normally prohibitive because the refinery's export netback tends to price it out of range for most buyers.
A Kirishi source downplayed the offer and said the total volume was only a few thousand tonnes.
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