On October 21, 5.7 thsd mt of crude oil were sold at Resources Auction 122, which took place on the floor of the Ukrainian Interbank Currency Exchange. According to
the official information of the UICE, the average price of oil was UAH 2,618 per mt, or USD 58.9 per bbl (excluding VAT, at USD/UAH 5.05). In comparison with the
previous Auction 121, held on September 23, oil jumped 22.6% in hryvnya terms.
The total volume offered at Auction 122 was 216.5 thsd mt, only 2.4% of which was sold.
The average price of gas condensate amounted to UAH 2,885 per mt (USD 476 per mt excluding VAT), down 25.5% in hryvnya terms since Auction 121. The total
volume of condensate sold was 0.65 thsd mt, only 3.5% of the volume offered (18.6 thsd mt).
About 92% of oil and 67% of condensate was offered by Ukrnafta [UNAF UZ, Strong BUY], a major Ukrainian oil and gas producer, as well as fuel retailer, which is
controlled by two strategic shareholders: the Ukrainian state (50%+1 stake) and the Privat Group (42%, controls management).
Our view: Ukrnafta obviously sold nothing. The price movements are irrelevant and NEUTRAL, because they are not indicative of the market situation at such small volumes.
Nevertheless, we note that we expected USD 66-74 per bbl on the basis of the world price situation, and the achieved levels of USD 58.9 per bbl are somewhat lower.
Most importantly, if Ukrnafta wanted to sell oil cheap to Privat Group affiliates, it most likely could have. Therefore, we conclude that Ukrnafta held its oil until better
times, which means that it is in the interests of the Privat Group to maximize Ukrnafta’s revenues and profits. This is POSITIVE – if true.