Sharply lower refined product prices may lead to record July imports for Latin America
Author Matthew Kohlman Editor Valarie Jackson Commodity Electric Power, Natural Gas, Oil, Shipping
HIGHLIGHTS
- Latin American July imports are on pace to break April's record
- Delivered gasoline prices down one-third from peak, ULSD down one-fifth
Delivered gasoline cargo prices in Latin America have dropped by one-third since its peak, but diesel cargoes are in most demand, with sources expecting July imports to approach record levels.
Platts assessments for eastern Mexico CIF cargoes dropped $4.01 July 14 to $124.08/b for gasoline and slid $1.75 to $149.68/b for ultra low sulfur diesel, according to S&P Global Commodity Insights data.
Platts assessed Brazil CFR Santos gasoline down $2.05 to $107.94/b and ULSD down $2.05 to $154.49/b. Ecuador RON 93 CIF fell $5.16 to $128.06/b and ULSD CIF declined $1.54 to $152.43/b. ULSD cargoes for Peru dropped $1.54 to $153.93/b and for Argentina fell $1.43 to $156/b.
Many of the prices reached record highs in early March right after Russia's invasion of Ukraine and again around the start of May. They jumped to fresh records in early June for gasoline and in mid-June for diesel. Eastern Mexico CIF gasoline was at a record $172.42/b June 9, while CIF ULSD posted $184.92 June 15. Argentina-delivered ULSD hit a record of $193.28/b June 16.
Gasoline prices are down by one-third from record highs, back to levels last seen in April, which are only 10% or so above late February before Russia invaded Ukraine. Many diesel prices are down 20% from those records, but they are at levels seen in mid-May. For instance, Santos ULSD, which was last as low May 20 after touching $154.95/b, is off sharply from its record of $190.45/b June 16. Like many Latin American assessments, it first broke long-standing records March 8, when it touched $183.83/b, and had another run-up in April and early May.
Despite elevated prices, the region is on a brisk export pace, one that sources say looks likely to break the April export record of 99.26 million barrels of US refined products to Latin America, accounting for 53% of US exports
"I hear activity is coming back with the flat price down," one regional market source said.
"These months and the following ones will be huge volumes of imports," a Brazil products source said, noting planned maintenance and strong crop demand in the largest South American country. "Argentina is also importing a lot because of the cold winter and the local electric companies are needing gasoil for power generation. We have a demand for diesel all over the world."
Argentina and Ecuador have awarded large tenders lately, and sources said Chile's state-backed COPEC recently either awarded or extended a contract for one cargo a week or so through October.
A third source said Brazil "keeps buying ratably," meaning they're locked in for a strong steady supply even if they are "playing with fire" by talking about buying cheaper Russian diesel and risking sanctions.
Chile is another country buying more than usual because of the harvest season and refinery issues, he said, but every country is looking harder at imports again. "With flat prices falling, they have that extra punch of motivation."
Mexico is the biggest draw of US products, with imports sitting around five-year highs and gasoline likely at record levels, according to S&P Global. Refinery utilization in Mexico has drifted lower and demand there and elsewhere is not slowing down, so imports would have to fill the gap.
"Unlike the rest of the world, Latin American demand has not fallen right now because of subsidies," said Debnil Chowdhury, vice president of refining and marketing at S&P Global.
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