Vedomosti reports that retail gasoline prices in Russia rose 0.2% over the last week. In the Central Region, they grew 0.3%, according to data from Thomson Reuters Kortes.
We calculate that, as of today, the internal market premium stands at USD 11/t and USD 29/t in the Central Region and Western Siberia, respectively, while on Monday 13 July it was minus USD 57/t and minus USD 35/t, 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 3% YoY decrease in refining throughput by Russian integrated oils in 5mo15.
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 5/bbl, a relatively high level, which can primarily be explained by seasonal demand for gasoline and diesel fuel. However, we believe that further limiting retail motor fuel price growth domestically would affect the refining margin of Russian oils, which is a negative development. Retail premiums shrank to some 39 USD/t in July 2015, down from USD 150/t this winter and much lower than the 70 USD/t in July 2014.
We do not expect any immediate market reaction to the news, however.