The Russian bitumen market is currently experiencing diverging regional tendencies, with both directions of price movement being contrary to each other among key production groups, WPB says. While European-regional levels have been under downward pressure, Siberian producers have gained considerably, resulting in overall national price index reduction of approximately 0.6%.
Slowly operating trading activity remains the top feature in the European group. Industry sources point to road construction companies being frustrated by reduced off-takes by road funds. Added to high borrowing costs, this has hindered traders from moving material without secured prepayments during contractual terms.
Fuel oil prices, after a small rally, retreated once more. Meanwhile, in the European cluster, the differential between fuel oil prices and bitumen prices increased by around 2,100 RUB per tonne to 5,800 RUB per tonne—around 1,900 RUB higher than for the same period last year. The increase in the differential even with softer bitumen prices suggests that profitability in production is gaining momentum. Market analysts anticipate that the manufacturers would keep production at current levels, thereby assisting in creating short-run sustained downward pressure on prices.
On the other hand, the Siberian cluster saw an average price increase of around 1.4%. Following a string of consecutive declines, the premium for fuel oil in that market surged by nearly 2,400 RUB per tonne to 11,400 RUB per tonne. In all of these clusters, such margins have now crossed last year's levels primarily due to the uneven movement of fuel oil prices over the recent past.
One of the biggest market shifts was by GPN–BM, which raised prices at the Permsky refinery, Profnefteresurs, and the Omsk plant by 1,000 RUB per tonne in the Urals and elsewhere. It was supported partly by reduced Omsk production levels, with a planned shut-down of the atmospheric-vacuum distillation unit for maintenance underway.
In the Central markets, on the other hand, bearish sentiment is still in control. GPN–BM cut prices at the Moscow refinery and YANOS cut by 600 RUB per tonne. Additional bearishness is provided by an unplanned visbreaking maintenance turnaround at NORSI and scheduled overhauls on the deep conversion unit at Samara group refineries. The feedstock for these complexes—vacuum residue—is also used in oxidation columns, and so any plant shutdown can have an impact on market balance. Despite these factors, improved production economics can lead to increased levels of production. Other producers kept their prices constant compared to the last term.
Trade activity on the exchange recorded a pick-up, with transaction volumes increasing substantially and volume of sales more than doubling. Transactions comprised Omsk and Angarsk BND 100/130 and Novo-Ufa and Ryazan refinery BND 70/100, with prices reflecting regional market differentials.
On the export side, rail deliveries were rising for a second consecutive period. Daily tonnages have risen significantly, with China and Turkey recording the largest buys and consuming overall totals of nearly 8 thousand tonnes in recent days. Kazakhstan, an old importer, followed with 3.2 thousand tonnes.
Overall, the overall conditions suggest that the European part of the market is set to depreciate in price further, while growth in the Urals will be constrained by competition pressure from western refineries. This observation is further supported by the fact that some Central-region transactions have been made at prices lower than officially listed prices—a feature of persistent bearishness.
By WPB
Bitumen, Price, Oil, Market
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