Russian tax incentives are encouraging exports of large amounts of fuel oil even as global demand for the relatively low-value product declines, according to a report by Reuters.
Tax policies designed to encourage the production of gasoline and diesel for domestic consumption make fuel oil more attractive to export than crude oil, while also supporting the continuing operation of old refineries that produce more of the low-grade product than more modern facilities.
More sophisticated refineries produce about 15 percent fuel oil, while in Russia the product accounts for more than a quarter of output.
The country has planned to phase the incentives out by 2015, equalizing the treatment of fuel oil and crude, but refiners have been slow to modernise their facilities, and officials now say they may delay the tax change.
"The government has begun having doubts with regard to levelling off fuel oil and crude duties from 2015," Deputy Primier Arkady Dvorkovichsaid in May.
Worldwide, the demand for fuel oil has declined in recent years, partly because ships have reduced their use of the fuel.
At the same time, the continued high export level helps refiners outside of Russia, who can further refine the fuel oil to make other products, particularly as an increasing part of crude oil supply comes from lighter grades like that found in shale.