OIL AND PRODUCTS
GLOBAL MARKET
The year 2000 was marked with a decade record of stable high prices for oil. In 2000, price for Brent oil was slightly short of the 1999′ record (over USD/Bbl 36 – USD/mt 273.5). In the five months of 1999, prices fluctuated within USD/Bbl 15-19 (USD/mt 114-144), whereas over the entire 2000 the figures stuck to USD/Bbl 22 (USD/mt 167).
Numerous reasons for increased oil prices originate from advanced world demand. OPEC representatives say traders’ speculative activities are among main reason of price growth. Hard-to-forecast actions of Iraq remain the source of market tensions, and Arabic-Israeli conflict adds problems.
In August-September 2000, increased oil prices together with high fuel taxes drove extremely high retail price for oil products in some European countries. Riots began in Western Europe with requirement to cut fuel taxes.
OPEC leaders charged Western countries with setting of high taxes for fuel. In return, in 2000 OPEC increased daily oil production by 3.45 mln. barrels. In October-December 2000, 30 mln. extra barrels entered the market from the U.S. state reserve. Finally, average prices for oil and products started falling by the year-end.
In 2000, prices for Russia’s Ural oil, A-92 petrol, and diesel fuel in Europe fluctuated from USD/mt 145-155 to USD/mt 235-245; from USD/mt 215-225 to USD/mt 365-375; and from USD/mt 205-215 to USD/mt 330-340 respectively. Average annual prices made USD/mt 190-200 for Ural oil; USD/mt 285-295 for A-92; and USD/mt 255-265 for diesel fuel. At the same time, prices on the European oil market in the beginning of January 2000 – late December 2000 added only USD/mt 5-10 or 2-5%. Thus, in early 2001, prices for Russia’s Ural oil made USD/mt 165-175 against USD/mt 160-170. Throughout the entire 2000, prices for oil products added USD/mt 10-30 or 5-15% on average and at the beginning of 2001 settled at USD/mt 245-255 for A-92 (USD/mt 220-230 in early 2000) and USD/mt 230-240 for diesel fuel (USD/mt 225-235 USD/mt). Dynamics of European prices for Russia’s Ural oil, A-92 petrol, and diesel fuel in 2000 is illustrated at Diagram 1.
Diagram 1. Prices for oil and products in Europe in 2000, USD/MT
Conjuncture situation on oil market in 2000 was controlled by OPEC. The organization intends to maintain the established price strategy in 2001. To keep oil and product prices from rapid increase traced in late 2000, at the consecutive meeting of oil ministers in Vienna (17.01.01), OPEC members decided to curtail oil production quota by daily 1.5 mln. barrels.
This resulted in prices for oil and products heading up in the first month of 2001. As compared to the beginning of January 2001, in early February European prices for oil products grew by USD/mt 10-40 or 5-15% on average. By late February 2001, prices for Russia’s Ural oil, A-92, and diesel fuel made USD/mt 195-205, USD/mt 290-300, and USD/mt 235-245 respectively. Fostered by market saturation, prices for oil and products in February started falling. As of early March 2001, European prices for oil products dropped by USD/mt or 5-20% against the beginning of February, and prices for Russia’s Ural oil, A-92, and diesel fuel made USD/mt 155-165, USD/mt 255-265, and USD/mt 225-235 USD respectively.
Dynamics of the European prices for Russia’s Ural oil, A-92, and diesel fuel in December 2000 – early March 2001 is represented at Diagram 2.
Diagram 2. Prices for oil and products in Europe in December 2000 – beginning of March 2001, USD/MT
RUSSIA
In 2000, wholesale supply prices on Russia’s interior market ranged between RUR/mt 3,050-3,150 and RUR/mt 4,700-4,800 for oil; RUR/mt 6,950-7,050 and RUR/mt 10,550-10,650 for A-95; RUR/mt 6,350-6,450 and RUR/mt 9,600-9,700 for A-92; RUR/mt 5,600-5,700 and RUR/mt 8,550-8,650 for A-76; as well as RUR/mt 4,300-4,400 and RUR/mt 7,600-7,700 for diesel fuel. Average annual prices made RUR/mt 3,550-3,650 for oil; RUR/mt 8,400-8,500 for A-95; RUR/mt 7,600-7,700 for A-92; RUR/mt 6,700-6,800 for A-76; and RUR/mt 5,800-5,900 for diesel fuel.
As compared to the beginning of 2000, wholesale supply prices on Russia’s interior market in January 2001 went up. Increase made RUR/mt 300-350 or 10-15% for oil (oil prices in late December 2000 were at RUR/mt 3,400-3,600 against supply prices in early January 2000 equal to RUR/mt 3,100-3,200). Oil product market registered advance by RUR/mt 1,800-2,700 or 20-60%. Diesel fuel prices grew the most – by more than 60%. As of late December 2000, wholesale supply prices on oil products in Russia were as follows: A-95 petrol – RUR/mt 9,900-10,000; A-92 – RUR/mt 9,000-9,100; A-76 – RUR/mt 7,800-7,900; and diesel fuel – RUR/mt 7,050-7,150 (in early January 2000, these were at RUR/mt 8,100-8,200; RUR/mt 7,200-7,300; RUR/mt 6,200-6,300; and RUR/mt 4,350-4,450 respectively). Dynamics of average supply prices for oil and products in Russia in 2000 is provided at Diagram 3.
Diagram 3. Average supply prices for oil and products on Russia’s market in 2000, RUR/MT
In January-February 2001, supply prices on Russia’s oil and product market have been steadily moving down. Wholesale prices for oil in January dropped by RUR/mt 350-450 or 10-15% coming to RUR/mt 2,850-3,150 in the first decade of February 2001 (RUR/mt 3,250-3,600 at the beginning of January). Supply prices for oil products lost RUR/mt 230-750 or 5-10% and by the beginning of February 2001 featured the following figures: A-95 petrol – RUR/mt 8,900-9,300; A-92 – RUR/mt 7,600-8,300; A-76 – RUR/mt 6,600-7,300; diesel fuel – RUR/mt 6,050-7,700. The respective indicators in early January were RUR/mt 9,400-9,850 (A-95); RUR/mt 8,300-9,100 (A-92); RUR/mt 7,300-8,000 (A-76); and RUR/mt 6,500-7,700 (diesel fuel). Nonetheless, in February 2001, oil prices grew by RUR/mt 100-200 or 5% to make RUR/mt 3,100-3,200 in early March. At the same time, average supply prices for oil products diminished by RUR/mt 50-125 or 1-2% coming to the following records at the beginning of March: A-95 petrol – RUR/mt 8,600-9,450; A-92 – RUR/mt 7,600-8,150; A-76 – RUR/mt 6,600-7,050; and diesel fuel – RUR/mt 6,300-7,350. By and large, in the two opening months of 2001, average supply prices on Russia’s interior oil and product market fell by RUR/mt 300-830 or 5-10%.
Dynamics of average supply prices on Russia’s oil and product market in January – February 2001 is illustrated at Diagram 4.
Diagram 4. Average supply prices for oil and products on Russia’s market in January 2000 – beginning of March 2001, RUR/MT
Till March 2001, entities involved in foreign economic activities saw more benefits in supplying oil products to Ukraine through Belarus. However, starting from March 2001, the Decree of the Sovmin of the Republic of Belarus No.101 of 26.01.01 introduced export customs duties for crude oil (270900) – EUR/mt 43; light distillates (271000110-271000390) – EUR/mt 39; medium distillates (271000410-271000590) – EUR/mt 39; gas oils – diesel fuel (271000610-271000690) – EUR/mt 39; and liquid fuel – black oil (271000710-271000790) – EUR/mt 31. New export duties in Belarus will also exclude supplies of Russian oil products to Ukraine without payments, which will affect both physical turnover and prices for oil product supplies to Ukraine.
UKRAINE
As compared to the previous year, Ukrainian import of oil and products suffered reduction in 2000. Export of oil in 2000 amounted to some 270 ths. tons, which made one-fifth of shipments in 1999. Supplies of oil products from the country curtailed by 30% coming to more than 2,160 ths. tons in 2000. Export of motor petrols accounted for 20% only from the 1999′ figure. Diesel fuel and black oil supplies were also on decline making some 30% against the indicator of 1999.
In 2000, average prices for oil and product export from Ukraine were as follows: oil – USD/mt 140 (USD/mt 95 in 1999), motor petrols –USD/mt 255 (USD/mt 135), diesel fuel – USD/mt 270 (USD/mt 125), and black oil – USD/mt 130 (USD/mt 80).
In comparison with 1999, Ukraine’s shipments of oil products in 2000 saw no structural changes. The top export article was black oil contributing just over 80% to export turnover of oil products. Supplies of diesel fuel added 16%, and motor petrols made mere 1-2%. Diagram 5 displays the structure of oil product export in 2000.
Diagram 5. Structure of oil product export from Ukraine in 2000
In both 1999 and 2000, Ukrainian oil was forwarded primarily to Poland as well as to third countries via companies registered in Ireland. Nonetheless, as compared with 1999, shipments to third countries in 2000 slashed from 97% to 41%, while oil supplies to Poland, on the opposite, skyrocketed from 2% to 31%.
By-region distribution of Ukraine-made oil products in 2000 saw fundamental changes against 1999. While in the previous year, the largest shipments of black oil and diesel fuel were bound to third countries through companies registered in Belgium and Ireland (40% and 35% respectively), in 2000 black oil was mainly supplied to third countries via firms registered in Panama (29%) and Virgin Islands (21%), as well as to Italy (15%). Shipments of diesel fuel in 2000 were mainly destined for Italy (32%) and third countries through firms registered at Virgin Islands (37%). As compared to 1999, Romania was the only country in 2000 that increased its share in Ukraine’s black oil export (from 8% to 10%).
In 2000, Ukraine’s import of oil, including condensed gas, reduced by nearly 40% against 1999′ figure and totaled 6 mln. tons approximately. Even supplies of condensed gas, which increased almost 3.5 times in 2000, failed to influence the decline.
As compared to the previous year, the structure of oil and condensed gas import in 2000 reported minor changes – top import article was oil, though portion of condensed gas augmented from 1% in 1999 to 3% in 2000 (from 45 ths. tons to 160 ths. tons).
Similar to 1999, condensed gas in 2000 was imported from Russia alone. Geographic pattern of oil shipments to Ukraine evidenced no changes in 2000 when compared to 1999. However, the share of Russia’s oil in total supplies shrank from 87% in 1999 to 69% in 2000, whereas Kazakhstan oil’s portion on the contrary advanced from 13% to 31%.
Ukraine’s import of oil products in 2000 added 16% as compared to 1999 and made some 4.5 mln. tons. Petrol import also reported a 6% increase. At the same time, reduction was traced in import supplies of diesel fuel (-2%) and black oil (almost 2 times down).
In 2000, the structure of oil product import to Ukraine was as follows: motor petrols contributed 41%, diesel fuel – 51%, and black oil – 4%. Diagram 6 represents the structure of oil product import in 2000.
Diagram 6. Structure of oil product import to Ukraine in 2000
Suppliers of petrols and diesel fuel in 2000 were primarily the same as in 1999. Yet, the share of Belarus grew from 9% in 1999 up to 32% in 2000, Russia’s – from 14% to 22%, and Lithuania’s – from 11% to 16% respectively. Simultaneously, supplies from Latvia diminished from 38% in 1999 to 24%.
Like in 1999, diesel fuel import in 2000 came mainly from Russia and Belarus. The share of Russia-produced diesel fuel stood virtually the same (45-46%), while the portion of Belarus’ product increased from 23% to 37%.
In 2000, average annual prices for import to Ukraine featured the following records: condensed gas – USD/mt 215, oil – USD/mt 180, motor petrols – USD/mt 280, diesel fuel – USD/mt 275, and black oil – USD/mt 170. To compare with, the respective indicators in 1999 were USD/mt 125 for condensed gas, USD/mt 96 for oil, USD/mt 240 for motor petrols, USD/mt 185 for diesel fuel, and USD/mt 75 for black oil.
When comparing prices at the beginning of 2000 and in the year-end, average supply prices in wholesale trade on Ukraine’s petrol market grew by some UAH/mt 100-250 or 5-15% (depending on type of fuel). Thus, as of early January, 2001, the price for A-95 petrol was at UAH/mt 2,000-2,300; A-92 – UAH/mt 1,860-2,200; and A-76 – UAH/mt 1,830-1,930, while the figures at the beginning of January, 2000 were UAH/mt 1,800-1,900 for A-95 petrol, UAH/mt 1,750-1,850 for A-92, and UAH/mt 1,700-1,800 for A-76. At the same time, average supply prices for diesel fuel went up by UAH/mt 550-650 or 50% over a year; thus, coming to UAH/mt 1,820-2,020 by the beginning of January 2001 against UAH/mt 1,200-1,300 in early January of 2000.
Dynamics of average supply prices on the Ukrainian oil product market in November 2000 – beginning of January 2001 is illustrated in Diagram 7.
Diagram 7. Average wholesale prices for oil products on Ukraine’s interior market in 2000, UAH/MT
Since the beginning of 2001, situation on Ukraine’s market for oil products has been stable. In the first month of 2001, wholesale supply prices on the market for high-octane petrols rose by UAH/mt 40-60 or 2-3% on average and by the beginning of February made UAH/mt 2,050-2,300 for A-95 petrol and UAH/mt 1,950-2,200 for A-92. On the contrary, the market for low-octane petrols and diesel fuel reported decline in wholesale supply prices by UAH/mt 50-70 or 3-4%. Hence, prices by early February 2001 were at UAH/mt 1,800-1,890 for A-76 and UAH/mt 1,790-2,015 for diesel fuel. In the second month of 2001, prices for A-95 stood virtually unchanged, whereas prices for A-92, A-76, and diesel fuel lost on average UAH/mt 15-75 or 1-4%. As of early March 2001, prices were as follows: A-95 – UAH/mt 2,080-2,300; A-92 – UAH/mt 1,920-2,200; A-76 – UAH/mt 1,740-1,890; and diesel fuel – UAH/mt 1,680-1,890. On the whole, in January-February 2001, prices for high-octane petrols (A-95 and A-92) added some UAH/mt 40-50 or 2%, with prices for A-76 and diesel fuel dropping by UAH/mt 100-140 or 5-10% on average.
In March 2001, Ukraine’s wholesale market for oil products evidenced reduction in prices for all fuel types. Hence, wholesale supply prices on the market for A-95 and A-76 petrols fell by UAH/mt 50-150 or 2-7% and in the end of March 2001 made UAH/mt 2,010-2,400 for A-95 and UAH/mt 1,650-1,850 for A-76. Simultaneously, wholesale supply price for A-92 shrank by UAH/mt 100-300 or 5-15% coming to UAH/mt 1,800-2,000 in the end of March. Prices for diesel fuel lost UAH/mt 90-130 or 5-7% on average and in late March 2001 made UAH/mt 1,600-1,800.
Dynamics of average supply prices on Ukraine’s oil product market in December 2000 – early March 2001 is represented at Diagram 8.
Diagram 8. Average wholesale prices for oil products on Ukraine’s interior market in December 2000 – beginning of March 2001, UAH/MT
Considering conjuncture on the European oil product market, estimated prices (DAF Ukrainian border) for oil product supplies to Ukraine in the second half of March 2001 were as follows: A-95 – USD/mt 270-290, A-92 – USD/mt 260-285, A-76 – USD/mt 240-270, and diesel fuel – USD/mt 225-240.
In the next month, conjuncture situation on the wholesale oil product market in Ukraine will be affected by events around the Law of Ukraine “On stimulating of agricultural development for 2001-2004”, which became effective since late February 2001. Nonconcurrence in implementation of provisions of the Law, development on conjuncture situation on the world oil and product market, as well as introduction of export duties by Belarus may trigger increase in wholesale prices for oil products (by 2-5% from prices of early March 2001).
Taking into account conjuncture on the European market for oil products, DAF (Ukrainian border) prices for Ukraine’s import of oil products in the second decade of April 2001 are estimated as USD/mt 290-300 for A-95, USD/mt 280-290 for A-92, USD/mt 240-250 for A-76, and USD/mt 220-240 for diesel fuel.
On the basis of import prices, in the second half of April 2001 prices for imported oil products (including all payments, delivery to customer) on Ukraine’s interior wholesale market may be as follows: A-95 – UAH/mt 2,450-2,550; A-92 – UAH/mt 2,350-2,450; A-76 – UAH/mt 2,100-2,200; and diesel fuel – UAH/mt 1,850-2,000.
When comparing present supply prices on Ukraine’s interior wholesale market for oil products with estimated prices for imported products, it turns likely that starting from the second half of April, interior prices in Ukraine may add some UAH/mt 50-150 for petrols and UAH/mt 20-50 for diesel fuel.