Fuel & Energy Ministry To Cancel Mandatory Oil Auctions

Concorde Capital: This seems to be a carbon copy of what happened in the Ukrainian oil products market in 2H04. At that time, a surge in oil product prices forced the government to take administrative measures to dampen them. Mandatory oil auctions were suspended, which enabled Ukrnafta (UNAF ? BUY) to sell curde oil to the Ukrtatnafta and Naftokhimyk Prykarpattya refineries at reduced prices. This resulted in a subsequent lowering of market prices for finished oil products. Unexpectedly, Ukrnafta managed to benefit from this regulation by signing a tolling agreement with Naftokhimyk Prykarpattya and gaining access to cheap oil products for distribution through its gas station chain. It is not clear if the company will be able to use the same agreement with Naftokhimyk Prykarpattya this year, as it is not certain if market regulators will allow it. We are positive about the company?s ability to use this situation to its advantage. WATCH