OIL AND OIL PRODUCTS

GLOBAL MARKET

Situation on the world market for oil and products lacked stability in November 2000. In the first half of the month, close to the meeting of ministers of oil industry from countries-members of the OPEC, uncertainty as regards increasing quota for oil production encouraged growing prices for both oil and products. Thus, in the first half of November 2000, prices on the European market added some USD/MT 10-50 on average, or 5-15%. Prices for Russian Ural oil, A-92 petrol, and diesel fuel, therefore, in the end of the period settled at USD/MT 235-245, USD/MT 275-285, and USD/MT 325-335 respectively as compared to USD/MT 215-225, USD/MT 265-275, and USD/MT 275-285 respectively at the beginning of the period.

However, on November 12, 2000, at the meeting of ministers of oil industry from countries-members of the OPEC in Vienna, decision was made to leave oil production quotas at the same level, since the OPEC countries raised quotas four times already throughout 2000. After the recent upswing on October 13, 2000, oil production reported a 21-year-record high figure. Aggregate increase in oil production over 2000 made 3.7 mln. barrels per day. Adoption of the mentioned decision stabilized the market for oil and products, which in turn lowered prices in the second half of November by USD/MT 25-45 or 10-20%. Therefore, in early December 2000, prices for Russian Ural oil, A-92 petrol, and diesel fuel in Europe made USD/MT 190-200, USD/MT 250-260, and USD/MT 290-300 respectively.

Dynamics of the European prices for Russian Ural oil, A-92 petrol, and diesel fuel over September-early December 2000 is illustrated at Chart 1.

Chart 1. Prices for Russian Ural oil, A-92 petrol, and diesel fuel over September-early December 2000, USD/MT.

In the first decade of December 2000, prices for oil products kept falling in Europe. Over the period under review, prices lost some USD/MT 40-50 on average or 10-20%, depending on the type of fuel. This was fostered by several factors, such as general decrease in consumption of oil products over winter season; warm winter; reactivation of oil exports from Iraq; continuous confrontation between Israel and Palestine, which grew into open conflict; as well as general business decline on the eve of Christmas.

Dynamics of the European prices for petrol A-98, A-95, A-92, as well as diesel fuel in the first decade of December 2000 is illustrated at Chart 2.

Chart 2. Prices for oil products in Europe in the first decade of December 2000, USD/MT

The estimated trend implies that after reduction prices moved into new quality level. No further sharp decrease is expected, at least, till the second decade of January 2001. We consider that prices for oil and products will fluctuate in the range of +/- USD/MT 15 from prices in the end of the first decade of December 2000.

RUSSIA

Over November 2000, average prices for oil and products supplied on the Russian market revealed insignificant drop by the average of RUR/MT 130-430 or 2-5% making the following figures at the beginning of December: oil – RUR/MT 4,400-4,650; А-95 petrol – RUR/MT 10,200-10,600; А-92 – RUR/MT 8,900-9,600; А-76 – RUR/MT 7,900-8,500; diesel fuel – RUR/MT 6,900-7,800 as compared to prices for oil products in early November, which made the following: oil – RUR/MT 4,650-4,850; А-95 petrol – RUR/MT 10,000-11,200; А-92 – RUR/MT 9,000-10,100; А-76 – RUR/MT 8,000-9,200; as well as diesel fuel – RUR/MT 7,000-7,900.

Dynamics of average prices for oil and products on the Russian market in November 2000 is illustrated at Chart 3.

Chart 3. Average prices for oil and products on the Russian market in November 2000, RUR/MT

According to our estimates, prices for refined oil products on the interior market of Russia will remain unchanged in December 2000. At the same time, prices for petrol may further reduce, since at the beginning of December 2000 prices for petrol on the Russia’s interior market made USD/MT 365-380 for A-95 petrol and USD/MT 320-345 for A-92 petrol, which is by some 25-45% up from the prices on the European market. In early December 2000, prices for diesel fuel on the European market were by 5-15% above the figure on the interior market of Russia, which made USD/MT 245-280.

At the beginning of December 2000, the government of the Russian Federation approved new rates of export duties imposed on oil and products. Rates of export customs duties for crude oil and products produced from bituminous minerals are settled at EUR 48, for light distillates – EUR 39, for medium distillates – EUR 39, for gas oil (diesel fuel) – EUR 39, and fuel oil – EUR 31.

Based on the present prices for oil products in the RF, calculated prices for supplies of Russian oil products in the first half of December 2000, considering all interior taxes of the RF and effective export duty, DAF basis Russia – Ukraine border at the direct purchase may come to USD/MT 410-420 for A-95 petrol, USD/MT 360-385 for А-92, USD/MT 325-345 for А-76, as well as USD/MT 290-320 for diesel fuel. Calculation reveals that Ukraine-bound imports of Russian diesel fuel solely are appealing, as the price for imported Russian petrol will substantially outrun calculated prices for petrol on DAF Russia-Ukraine border, considering quotations on the European market.

Situation, however, may suddenly change in 2001 in case Ukraine is treated by Russia as a far foreign state. In this case, estimates foresee sizable increase in oil imports directly from Russia as opposed to supplies from the Baltic States.

UKRAINE

In November 2000, situation on the Ukrainian market for oil products remained stable and auspicious for consumers. Over one month, wholesale prices on Ukraine’s market for light oil products dropped by UAH/MT 50-100 on average or 3-5% making the following figures at the beginning of December: А-95 petrol – UAH/MT 2,150-2,550, А-92 petrol – UAH/MT 2,000-2,250, А-76 – UAH/MT 1,920-2,050, and diesel fuel – UAH/MT 1,950-2,150 as compared to the prices at the beginning of November, which made UAH/MT 2,280-2,400 for А-95 petrol, UAH/MT 2,120-2,300 for A-92 petrol, UAH/MT 2,050-2,170 for A-76, and UAH/MT 2,020-2,200 for diesel fuel. This is the result of decreasing prices on the European market as well as of price policy of Tyumen oil company of Ukraine, which sold some amount of oil products from Lisichansk Oil Refinery at the exchanges at the prices, which were by UAH/MT 100-300 down from wholesale prices on the Ukrainian market for oil products. Results of bids for oil products at the Ukrainian inter-banking currency exchange over October-the first decade of December 2000 are revealed in Table 1.

Table 1. Results of bids for oil products at the Ukrainian
inter-banking currency exchange over October-the first decade of December 2000.

*Average sale price of 1 ton of fuel (VAT included), UAH.

Dynamics of average prices for supplies of oil products on the Ukrainian market in October-the first decade of December 2000 is illustrated at Chart 4.

Chart 4. Average wholesale prices for oil products on the interior market of Ukraine
in October–early December 2000, UAH/MT

Over the 11 months of 2000, Ukrainian oil-refineries handled 7.474 mln. tons of oil, which is by 2.409 mln. tons or 24% less than over the respective period of 1999. In November 2000, oil-refineries reduced processing of oil by 202.7 ths. tons or 20% as compared to October, though raising by 50 ths. tons against November 1999.

Output of petrol in November 2000 made 180.7 ths. tons (+5.2 ths. tons or 2.8% against October 2000 and +38.5 ths. tons against November 1999). Production of diesel fuel was at 212.8 ths. tons, which is by 9.7 ths. tons or 4.4% less than in the previous month and by 24.3 ths. tons less than in November 1999. Figures of oil refining and producing of oil products by Ukrainian oil-refineries over January-November 2000 are represented in Table 1.

Table 1. Oil refining and production of oil products by Ukrainian oil-refineries in the 11 months of 2000, ths. tons

Data source: UkrNefteKhimPererabotka

Comparison of the balance of light oil products (import minus export, excluding domestic production) in Ukraine over January-November 2000 to the respective period of 1999 reveals that the interior market of Ukraine obtained petrol and diesel fuel by some 240 ths. tons or 14-16% more. However, decreasing outputs of petrol and diesel fuel by Ukrainian oil-refineries over January-November 2000 against the respective period of 1999 by some 500 ths. tons and 750 ths. tons respectively led to shortage of petrol and diesel fuel accumulating over the 11 months of 2000 on the Ukrainian market and summing to 150-200 ths. tons and 450-500 ths. tons respectively. Absence of the market reaction evidences that petrol shortage was covered with petrol produced out of condensed gas (which was not considered in the calculations), whereas consumption of diesel fuel went down.

Considering conjuncture on the European market for oil products, in the second half of December 2000 calculated prices for oil products supplied to Ukraine on DAF basis Ukrainian border are fixed as follows: for А-95 – USD/MT 240-260, А-92 – USD/MT 230-250, А-76 – USD/MT 230-250, and diesel fuel – USD/MT 250-270.

On the basis of import prices, calculated wholesale prices for oil products on the interior market of Ukraine may settle in December as follows: for А-95 petrol – UAH/MT 2,050-2,200; А-92 – UAH/MT 1,950-2,050; А-76 – UAH/MT 1,930-2,050; and diesel fuel – UAH/MT 1,900-2,000.

However, in 2001, this auspicious for consumers situation may be somewhat leveled with introduction of new excise taxes for light oil products. Pursuant to the Law of Ukraine «On temporary order of taxation of operations on production and sales of crude oil and some fuels and lubricants» No.1521-III of March 02, 2000 with all amendments, starting January 01, 2001 excise tax rates are raised for motor petrol from EUR/MT 40 to EUR/MT 60 and for diesel fuel from EUR/MT 10 to EUR/MT 30.

Tatyana MELNIK, PhD (Economic Sciences).

(Compiled using the information with DERZHZOVNISHINFORM)