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Monday April 15, 2024

Russia bans gasoline exports for 6 months from March 1

Domestic gasoline prices are sensitive for motorists and farmers

By News Desk
February 28, 2024
The Liberian-flagged oil tanker Ice Energy (left) transfers crude oil from the Russian-flagged oil tanker Lana (right), off the coast of Greece, on May 29, 2022. — AFP
The Liberian-flagged oil tanker Ice Energy (left) transfers crude oil from the Russian-flagged oil tanker Lana (right), off the coast of Greece, on May 29, 2022. — AFP

MOSCOW: Russia on Tuesday ordered a six-month ban on gasoline exports from March 1 to keep prices stable amid rising demand from consumers and farmers and to allow for maintenance of refineries in the world's second largest oil exporter.

The ban, first reported by Russia's RBC, was confirmed by a spokeswoman for Deputy Prime Minister Alexander Novak, President Vladimir Putin's point man for Russia's vast energy sector.

RBC, citing an unidentified source, said Prime Minister Mikhail Mishustin had approved the ban after Novak proposed it in a letter dated Feb. 21. A second source told Reuters that the decision had been made but the decree had not yet been issued.

"In order to offset excessive demand for petroleum products, it is necessary to take measures to help stabilize prices in the domestic market," Novak was quoted as saying in his proposal by RBC.

Domestic gasoline prices are sensitive for motorists and farmers in the world's biggest wheat exporter ahead of a March 15-17 presidential election, while some Russian refineries have been hit by Ukrainian drone attacks in recent months.

Russia and Ukraine have targeted each other's energy infrastructure in a bid to disrupt supply lines and logistics and demoralise their opponents, as they seek the edge in a nearly two-year-old conflict that shows no sign of ending.

Exports of oil, oil products and gas are by far Russia's biggest export, a major source of foreign currency revenue for Russia's $1.9 trillion economy, and ensure that Moscow has a place at the top table of global energy politics.

The Kremlin has been working with Saudi Arabia, the world's biggest oil exporter, to keep prices high as part of the broader OPEC+ grouping which includes the Organization of the Petroleum Exporting Countries and key allies. Russia is already voluntarily cutting its oil and fuel exports by 500,000 barrels per day in the first quarter as part of OPEC+ efforts to support prices.

GASOLINE

The top gasoline producers in Russia in 2023 were Gazprom Neft's Omsk refinery, Lukoil's NORSI oil refinery in Nizhny Novgorod and Rosneft's Ryazan refinery.

Russia in 2023 produced 43.9 million tons of gasoline and exported about 5.76 million tons, or around 13% of its production. The biggest importers of Russian gasoline are mainly African counties, including Nigeria, Libya, Tunisia and also United Arab Emirates.

Russia last month reduced gasoline exports to non-Commonwealth of Independent States countries to compensate for unplanned repairs at refineries amid fires and drone attacks on its energy infrastructure.

Outages include the halt of a unit at NORSI, the country's fourth largest refinery, located near the city of Nizhny Novgorod, some 430 km (270 miles) east of Moscow, following what is believed to be a technical incident.

Last year, Russia banned gasoline exports between September and November in order to tackle high domestic prices and shortages.

This time, the ban will not extend to member states of the Eurasian Economic Union, Mongolia, Uzbekistan and two Russian-backed breakaway regions of Georgia - South Ossetia and Abkhazia.

Wholesale fuel prices in Russia have risen since the start of the year. According to Feb. 26 prices on the St Petersburg international mercantile exchange, 92-octane gasoline had risen by 22 percent since Jan 1, while 95-octane gasoline was up by 32 percent. Since the announcement of the export ban, 92 has fallen 3.3 percent.

The price of 95 gasoline in Russia is about 62 U.S. cents per litre, compared with more than $2.05 in western Europe.

OIL PRICES

Meanwhile, oil prices edged higher on Tuesday as the market focused on uncertainty over a potential Gaza ceasefire and some expectations that producer group OPEC+ will extend voluntary supply cuts in March.

Brent crude futures were up 77 cents, or 0.93 percent, to $83.3 a barrel at 1639 GMT. U.S. West Texas Intermediate crude futures (WTI) were up 88 cents, or 1. percent, at $78.45.

Israel and Hamas, as well as Qatari mediators, all sounded notes of caution on Tuesday about progress towards a truce in Gaza, after U.S. President Joe Biden said he believed a ceasefire could be reached in under a week to halt the war for Ramadan.

Also supporting crude were comments from Yemen's Houthi spokesperson, who said the group's operations in the Red Sea would stop only when Israeli "aggression" against Gaza ends and the siege was lifted.

Houthi missile and drone attacks on international shipping have driven up the cost of transporting energy products and contributed to a tighter market.

"I think that the price action itself is calling attention to a tight physical balance in the market," said Tim Evans, an independent oil market analyst.

Elsewhere, OPEC+ will make a decision in March on whether to extend voluntary production cuts to bolster prices.

"We expect OPEC+ to announce the rollover of voluntary production quotas, at least until the June Ministerial Meeting, to provide additional support," Helima Croft, of RBC Capital Markets, said in a note late on Monday.

Meanwhile, there have been signs that Chinese oil demand could pick up and push prices higher. Global crude oil markets are expected to be fairly stable this year at around $80 a barrel, Russel Hardy, chief executive officer of oil and gas trader Vitol, said.

Speaking at the Energy Institute conference, Hardy also said global oil demand was expected to peak in the early 2030s.

Also on Tuesday, Russian authorities announced a six-month ban on gasoline exports from March 1 to compensate for rising demand and to allow for refinery maintenance.

Both oil benchmarks had settled more than 1 percent higher on Monday after declines of 2-3 percent over the previous week as markets factored in a greater likelihood that cuts to interest rates might take longer to come than previously expected.