Damping mechanism protects Russian domestic oil market: Spimex
12th July 2022 15:03 GMT

Russia's damping mechanism on gasoline and diesel is protecting the Russian domestic market during a period of high international export netbacks, the CEO of Russia's St. Petersburg International Mercantile Exchange, Aleksei Rybnikov, said July 12.

Consequently, the damping mechanism "at least played a role," Rybnikov said.

The damping mechanism was introduced to compensate Russian producers when export prices exceed domestic values.

Meanwhile, high prices of jet fuel have been partly attributed to the damping mechanism on kerosene, which unlike gasoline and diesel entails compensation to airlines rather than producers.

While for airlines the final price is lower due to the compensation received, the high kerosene price is making blending of kerosene with summer diesel into winter diesel less economically efficient, senior manager Pavel Strokov said.

Furthermore, while kerosene is excise exempt, when blended into winter diesel, excise needs to be paid on the final product, and tax authorities have stepped up monitoring on those payments.

The blending of the excise-free kerosene with summer diesel in previous years provided a substitute for refinery-produced winter diesel, but tax authorities have been clamping down on the process over recent years.

Meanwhile, kerosene sales on the exchange floor over January-June dropped 48.2% to 523,000 mt due to lower demand, according to Spimex data. Sales of regular gasoline rose 5.6% to 3.042 million mt, and premium unleaded gasoline amounted to 1.66 million mt, up 4.9%. Diesel sales rose 30.5% to 6.263 million mt.

Sales of fuel oil rose 19.6% to 747,000 mt. Domestic sales were boosted after fuel oil export flows were hindered by sanctions and self-sanctioning on the international markets following Russia's invasion of Ukraine.

In the first six months of the year 13.410 million mt of oil products traded on the exchange floor, up 11.2% year on year. Every 4 mt of oil products shipped to the domestic market trades on the exchange floor, Rybnikov said.

Platts ,
12th July 2022 15:03 GMT