- Trading conditions update for oil&gas sector and model refining margin in June and Q2 2022
In order to assess the impact of external factors on its performance, the LOTOS Group provides a summary of macroeconomic data, which reflect the economic climate in Europe’s refining industry, i.e.:
- Brent Dated prices, which serve as a benchmark for the majority of other crudes traded on the European market
- Brent Dated-Urals Rotterdam price differentials
- Urals Rotterdam prices, which serve as a basis for calculating the Company’s model refining margin
- Crack spreads for fuel products which comprise the model barrel of products obtained by processing crude oil at the Company’s refinery in Gdańsk, serving as a basis for calculating Grupa LOTOS S.A.’s refining margin
- EUR and USD exchange rates.
The relation between the two currencies affects the LOTOS Group’s performance, as the prices of crude oil and certain products are quoted in USD, and also because some of the Group’s debt is denominated in these currencies.
As its main feedstock, Grupa LOTOS S.A. uses Russian REBCO crude (Russian Export Blend Crude Oil), also referred to as Urals. Compared with the global Brent benchmark, REBCO is a heavier crude with a higher sulfur content, and yields more middle distillates (diesel oil, aviation fuel).
Brent Dated represents a light, sweet crude produced in the North Sea, its price determined with reference to crudes such as Brent, Forties, Oseberg and Ekofisk. Other crudes traded on the European market are priced using the Brent Dated differentials.
REBCO (a Russian crude benchmark) is a blend of several crude types used domestically or exported. Russian crude is a medium sour crude with approximately 32 API gravity and a sulfur content of approximately 1.6%.
Its parameters are the reason behind a discount against the Brent crude benchmark. The price difference between these two types of crude is called the Brent-Urals differential (USD/bbl). If Urals prices drop relative to Brent (and the spread increases), the refining margin earned by Grupa LOTOS goes up.
* API gravity – crude oil density measure developed by the American Petroleum Institute (API). The higher the API gravity, the lighter the crude oil. Light crude oils have API gravity of 38 or more, whereas heavy crude oils – of 22 or less. Crude oils with API gravity between 22 and 38 are generally referred to as medium.