Kommersant reports that the wholesale gasoline price at SPIMEX dropped 1.5% over the last week, adding some 20% YTD, while the retail gasoline prices have increased by just 1% since the beginning of the year. The paper suggests that the decrease might be driven by the fact that the increase in the retail gasoline prices is not acceptable as it is considered socially important, while the retail margin is no longer able to cover this disproportion, and so the wholesale segment’s profitability might start suffering.
We calculate that today the internal market premium stands at minus USD 57 and minus USD 35 per ton in the Central Region and Western Siberia, respectively. A couple of weeks ago, on Monday 29 June, the internal market premium was plus USD 11 and plus USD 45 in the Central Region and Western Siberia, respectively. There have been negative premiums on the domestic oil product market from time to time since the beginning of the year, which was reflected in the visible 2% YoY decrease in refining throughput by Russian integrated oils in 1Q15. As we have said before, were the internal market premium for oil products (namely, gasoline) to move from zero to negative territory, it could make exports a more attractive alternative, unless domestic retail and wholesale prices for motor fuel rise. Nevertheless, it is important to mention that gasoline in Russia is considered a socially important good. Therefore, retail gasoline prices do not move freely or reflect international price dynamics. Nevertheless, the oil sector remains relatively profitable, in our view. The refining margin of an average refinery currently stands at some USD 6/bbl, a relatively high level, which can primarily be explained by seasonal demand for gasoline and diesel fuel. However, we believe that further reservation of the retail motor fuel price domestically would affect the refining margin of Russian oils, which is a negative development. We do not expect any immediate market reaction to the news, however.