Russian Fuel Prices Hit Record Highs

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According to Kommersant, on Tuesday morning the spike in oil prices has resulted in an increase in Russian gasoline costs. The price increase may benefit petroleum producers. According to analysts, the profitability of fuel oil production has increased by approximately 200 rubles ($2.8) per ton of refined oil since September of the pre-pandemic 2019. 

However, since early 2021, the profitability of fuel oil production has only decreased as the price of oil for refineries rises.

According to SPIMEX statistics, the current price of fuel oil is 26,900 rubles ($371) per ton, a 42 percent rise from the beginning of 2021. The previous high was achieved in 2018 at 21,000 rubles ($290) per ton.

In the period January-September 2021, Russia produced 28.7 million tons of oil fuel, with a total volume of primary oil refining of 185.5 million tons. Rosneft is the biggest producer, accounting for about 40% of total Russian fuel oil output (11.8 million tons), with LUKOIL accounting for 10%, Surgutneftegaz accounting for 15%, and Gazprom and Gazprom Neft accounting for 11%.

According to Evgeny Tyrtov of Vygon Consulting, domestic market prices are formed at export parity, while European quotes for fuel oil with a sulfur content of 3.5 percent are at their highest levels since autumn 2018.

High oil costs and inter-fuel rivalry with gas are driving price increases, with the latter breaking historical price records in Europe. According to Tyrtov, the current price differential between oil and the equivalent oil product for fuel oil is currently greater than it was in September 2018 and 2019.