Russian authorities discussing easing fuel export ban: energy minister

Russia's authorities are discussing a possible easing of the current ban on diesel exports, with a decision on the topic expected in the near future, Energy Minister Nikolai Shulginov said Oct. 4.

Speaking to journalists in Astana, Shulginov said no decision had been taken. He said the priority was to ensure the continued operation of the country's refineries, with no issues encountered so far.

"The theme is being discussed at all levels. When these decisions have been taken they'll be published," Shulginov said when asked if a partial lifting of the export ban was a possibility. "...we are thinking about what we'll do in future. A decision will soon be published."

His comments come a day after the daily Kommersant reported that Russian oil companies are planning to ask President Vladimir Putin for the export ban on diesel and gasoline to be lifted as it could lead to problems in the domestic market.

Oil companies are concerned that refineries that cannot ship their summer diesel may not have sufficient storage for winter diesel whose production is due to start shortly. Shortages of winter grade in the past have boosted prices to unusually high levels.

The ban was already filling up refinery storage, according to market sources, who did not expect it to last more than another week as otherwise plants that are coming back from their autumn maintenance later this month will have to cut runs, which could lead to lower output and domestic supply.

Partial lifting of pipeline diesel ban

Russian media also reported that a partial lifting of the diesel ban is on the cards although the ban on gasoline would remain in place for the time being. According to Kommersant daily, restrictions could be eased on pipeline diesel exports after storage space has practically been depleted. Diesel for the domestic market is predominantly shipped by railcars.

Diesel traders in Northwest Europe have also suggested that the diesel ban would be only temporary as the domestic market cannot absorb all refinery output. Russian domestic consumption accounts for approximately half of the diesel refinery output.

"Refineries would have to shut down and [operate] below optimal loads," a trader said.

Meanwhile, authorities have indicated that measures will be stepped up to contain the so-called grey export when product aimed for the domestic market and for which compensation has been paid to producers under the damping mechanism has been exported by third parties not involved in its production. According to recent comments by Deputy Prime Minister Alexander Novak, future export bans on oil products would be applied only to companies that are not involved in their production.

According to market sources, the grey exports have contributed to the spot price surges.

The decision about the partial easing of the export ban is expected to be taken by the end of this week as otherwise some refineries will be forced to start reducing throughput.

Refinery runs

Shulginov rejected a suggestion refineries' storage capacities had been exceeded due to an accumulation of summer-grade diesel as a result of the current ban on product exports, saying the ministry was well aware of the situation of all refineries.

"If there were these problems -- insoluble ones -- we'd have already seen run cuts at the refineries. But we don't see that happening at the moment. All problems that arise are being resolved... It's our task to prevent any run cuts at refineries," he said.

Russia announced on Sept. 21 a temporary ban on most diesel and gasoline exports, in a bid to curb soaring domestic pump prices. The move is set to remove almost 1 million b/d of seaborne diesel from world markets and smaller gasoline flows of around 150,000 b/d, according to tanker tracking data.

In his most recent comments on Oct. 3, Novak was quoted by local media as saying that the ban would remain until the domestic market was fully stabilized.

While spot prices have come off since the ban was announced, prices at retail stations are expected to factor in the drops once product purchased at the lower prices reaches them.