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. Last Updated: 07/27/2016

September Oil Prices Drop 15%

Domestic oil prices for September delivery fell by an average of 15 percent from the previous month due to oversupply in the home market in August and declining global prices, traders said Wednesday.

Deals were done at levels of 6,850 rubles to 7,200 rubles ($267 to $280) per ton at west Siberian metering points this month, compared with 8,300 rubles to 8,350 rubles per ton a month ago.

Traders said the main reason for the market saturation in August was the introduction of higher export duties on crude, which are changed every two months based on global prices.

This was coupled with a decline in world prices. Average Dated Brent prices during the latest session stood at $66.94 per barrel, down from $78.21 per barrel last month, making exports even less attractive than domestic refining.

The situation may be repeated next month, when traders will start selling and buying domestic crude for October delivery.

"Oil export duties will rise by another $25 [per ton from October], and if Brent does not rise we will have to sell cheaper," a trader with a Russian company said.

Some 2.8 million to 3.5 million tons of oil are sold on the local market every month. Crude is mainly sold by small producers and major firms that lack refining capacity and is bought by independent refiners such as the Bashkir group of plants and the Moscow refinery.

Oil export duties will rise to a new high of $250 per ton from Oct. 1 from the current $223.90.

TNK-BP opened the session by selling some 100,000 tons of crude oil to Alliance's Khabarovsk refinery at levels close to 7,150 rubles at West Siberian metering points. Small Siberian producers sold crude at 6,850 rubles to 7,100 rubles.

Traders said the September session was marked by Rosneft buying oil for its Samara refineries from Surgutneftegaz. The Bashkir group of refineries bought crude at 7,500 rubles at the refinery gate.

The Moscow refinery, the second largest buyer after the Bashkir plants, bought crude at 7,300 rubles to 7,400 rubles per ton at the refinery gate.