Russia postpones gasoline export ban due to falling domestic prices

The Russian government has decided to postpone introducing an export ban on gasoline due to declining prices for the motor fuel and an "improving situation" on the domestic fuel market, according to the press release published Aug. 10, referring to an easing of the tight domestic market and record prices seen over the summer.

Russia considered introducing a ban on exports for at least three months as a rise in domestic tourism and driving amid limited international travel during the pandemic shrank supply and sent prices to record highs.

The government was originally supposed to make a decision on the export ban by the end of July based on trading activity, with the energy ministry proposing July 30 to launch the process. But it has also used other measures to boost supply, especially by increasing the percentage of product that must be traded on the St. Petersburg International Mercantile Exchange, or Spimex.

"We are observing a downward trend in stock prices. We hope that the situation will return to normal in the near future," Deputy Prime Minister Alexander Novak said at a meeting with oil companies late Aug.9, as quoted by the press release.

Novak also noted a 14.6% year-on-year fall in gasoline exports in July, while domestic gasoline inventories stood at 1.6 million mt "meeting the needs of the domestic market."

"More drastic measures, such as a ban on the export of petroleum products, remain on the agenda and can be applied at any time if the situation worsens," he added.

Prices for RON 95 gasoline on Spimex were at Rb58.728/mt Aug. 9, down from record levels of Rb60,03/mt July 22. Prices for RON 92 product were at Rb57.288/mt, down from a record Rb57.947/mt Aug. 4.

S&P Global Platts assessed gasoline premium unleaded on an FCA basis Moscow at Rb58.55/mt Aug. 9, with regular unleaded at Rb57.90/mt. This was down from respective records Rb60.40/mt July 22 and Rb58.600/mt Aug. 4.

"In August to date, the gasoline export netback is down 3% relative to the end of July. We think that falling oil prices might contain the profitability of export sales and, thus, alleviate the pressure on domestic wholesale prices," analysts at VTB Capital said in a note. "For most oil companies, domestic supplies of gasoline are more profitable than export deliveries, if the damper subsidy is accounted for."

One of the factors helping to alleviate pressure on Russia's motor fuel market was its recent lifting of compulsory exchange trading volumes for gasoline from 11% to 12%.

Novak also proposed adjusting exchange trading, which may temporary ban the sale of fuel to non-producers, ban its purchase by entities affiliated with vertically integrated oil companies, and limit the maximum price rise in one trading session.

The Russian energy ministry also plans to adjust the maintenance schedule of oil refineries to ensure supply during the peak summer season.

Russia produced 3.33 million mt of gasoline in July, according to the Russian energy ministry.