Exporters Selling Fuel at Home

Some of the country's largest fuel exporters are redirecting volumes to the domestic market in a rush to cash in on high prices at home while recession fears drive a downturn on international oil markets.

Prices for light products as well as heavy fuel oil remain relatively high in Russia, while gas oil futures, the benchmark for cash trade in Europe, hit a three-month low this week, and Europe's fuel oil benchmark in recent weeks has traded near its deepest discount to crude oil in about a year.

On an outright basis, the seven-day moving average for heating oil with 0.2 percent sulfur, the main benchmark for Russian gas oil in northern Europe, is running near $740, while the fuel oil average stands at $409.14.

According to Reuters data, diesel prices averaged 17,750 rubles ($710) per ton Friday, down 1 percent from the previous week, while fuel oil was high for the season, at 6,475 rubles per ton, down from 6,955 rubles.

Traders say Russian prices will succumb to international pressure soon, as export volumes stay in the country and the peak winter heating period passes. The export duty will also rise in February.

From the crude oil side, lower domestic prices on barrels for February delivery are expected to tug product prices down in the coming weeks, spurring the rush to make sales on the local market.

Among the sellers, the 336,000-barrel-per-day Kirishi refinery near St. Petersburg, which normally exports 90 percent of its fuel oil to northwest Europe via the Baltic, surprised traders by offering spot cargoes to the local market for the first time in memory.