Russia could prolong gasoline export allowance to drain inventories

The potential export extension underscores how Russia’s gasoline sector is being reshaped by sanctions over Moscow’s campaign in Ukraine.

Russia is considering allowing its refiners to continue exporting gasoline beyond the end of June as the country grapples with swelling inventories of the fuel, according to people familiar with the matter.

The Russian government has already permitted international shipments of gasoline until June 30. But with stockpiles mounting, there are now discussions to potentially prolong that export window until the end of July, said the people, who requested anonymity to discuss private deliberations.

Russia has seen its gasoline inventories swell in recent months as sanctions over its invasion of Ukraine disrupt traditional export flows and crimp domestic consumption. Permitting gasoline exports beyond June could provide some relief for Russian refiners grappling with the fuel glut.

At the same time, keeping some volume of gasoline flowing to export markets may help prevent Russia’s refining sector from getting overwhelmed by the inventory buildup. Shutting down or throttling operations at refineries can be operationally difficult.

The potential export extension underscores how Russia’s downstream sector is being reshaped by sanctions over Moscow’s campaign in Ukraine. Traditional buyers of Russian gasoline and other refined products, particularly in Europe, have shunned new Russian energy shipments unless pre-existing contracts are involved.

That has left Russia’s refiners facing a massive pivot towards new markets, predominantly in Asia and the Middle East. However, logistical hurdles and financing issues have made delivering fuel to those distant outlets challenging.

Russia exported around 150,000 barrels per day of gasoline before the Ukraine conflict, according to data from the International Energy Agency. Much of that volume traditionally went to Europe and other countries that have now banned Russian energy imports.

The domestic fuel situation is further complicating matters. Gasoline consumption inside Russia is down amid economic turbulence linked to the sanctions. That, combined with the export disruptions, is causing the product to back up in the country.