EMEA News
Russia May Undertake Run Cuts on Falling Fuel Oil Prices: Reports
With fuel oil netbacks at some Russian refineries now estimated to be in negative territory, and with no end in sight for chronically low crude prices, traders believe Russia may soon undertake run cuts, according to reports.
"There are a lot of expectations for a production drop in Russia," a European fuel oil trader told Platts.
A naphtha trader added that run cuts are already happening: "the question is to what magnitude."
Last year, big Russian refineries cut primary processing close to the level of secondary units, aiming to process residue into lighter products.
However smaller and simpler refineries were said to be currently operating normally, prompting one source to comment that, "How long they can survive is not clear."
One issue for some refiners was said to be rising domestic railway tariffs, but plunging fuel oil prices in the prime Northwest Europe export market.
Those located far away from ports were facing transportation costs exceeding their sale price.
While run cuts are viewed by traders as a solution to adverse market conditions, a Russian trader pointed out that "It is not that easy to mothball production," meaning that smaller refineries either have to fully shut down or work at full capacity.
Last month it was reported that Russia was ready for talks with the Organization of Petroleum Exporting Countries (OPEC) to stabilize the crude market, only to be met with the familiar reply that such talks were unlikely to happen.
