Buenos Aires February 16 2022: Ultra low sulfur diesel delivered and import parity prices raced past $120/b in several Latin American countries Feb. 14, but the highest prices in over seven years hardly slowed a flurry of distillate tenders from the region, including the most recent one seeking 2.52 million barrels of high sulfur diesel for Ecuador.
S&P Global Platts assessed ULSD CIF cargoes for Ecuador up $2.15/b to $120.45/b Feb. 14, for Peru up $2.15/b to $120.95/b, for Argentina up $2.14/b to $121.46/b, and for Eastern Mexico up $2.07/b to $116.25/b. Platts first started assessing the delivered cargoes in February 2016, and they all closely track US Gulf Coast pipeline ULSD, which rose 4.89 cents to $2.9423/gal, or $123.48/b — the highest level since June 27, 2014, when it was $2.9466/gal.
Import parity prices for ULSD jumped $2.18/b to $117.57/b for Colombia, and Peru’s rose $2.36/b to $122.55/b, each highs since the IPPs were created in recent years to reflect the price of product imported on the day, inclusive of costs from product value to demurrage and storage. The ULSD IPP for Santos in Brazil, created in November 2018, rose $2.20/b to $123.23/b.
HSD barrels, with higher sulfur, are cheaper than ULSD and are used for power generation instead of trucking, but they face the same rising values. Petroecuador tendered Feb. 14 for 2.52 million barrels of HSDfor delivery from March through June. Petroecuador’s request for nine cargoes of 5,000 ppm sulfur diesel, used mostly by electricity plants and agro-industrial equipment, comes a week after Argentina’s wholesale power administrator Cammesa agreed to buy 18 cargoes of HSD from six entities through April. A flurry of ULSD and HSD tenders from the Dominican Republic to Jamaica to Uruguay and Brazil has been issued since then, but theever-rising distillate prices raised concerns that sales might slow.
“Cammesa is a different animal” from the others,” one distillate trader said last week. “I think we are starting to see demand destruction in LatAm due to high prices.”
But Ecuador’s tender illustrates that some Latin American countries may have little choice but to keep buying.
“I think their needs are increasing, and their local refineries cannot produce more,” a second trader said Feb. 14.
Colombia, meanwhile, came out with a jet fuel buytender late last week, adding to cargoes awarded for ULSD — the South American nation usually sells more diesel than it imports. Market sources cited issues at their interior refinery, prompting the imports.
In Mexico, ports are reportedly so busy that cargoes are delayed more than usual.
“They always have ullage delays throughout the year,” a third source said. “But, yes, right now that’s the case in Mexico.”
A fourth trader added that Mexico is trying to ease high prices by capping the special sales and services tax, known as IEPS in Spanish, paid by importers. The government alters the IEPS each week, creating a risk similar to currency fluctuations.
“They capped the IEPS because of ‘high’ prices,” he said. “They’re trying to help the end-consumers at the pump.”
ULSD demand isn’t strong everywhere, with sources saying Brazil may be importing more to offset lower internal production. Puerto Rico in the Caribbean has brought in a limited three cargoes of ULSD through Feb. 8, US Customs data showed. On the gasoline side, however, the data showed the US territory has imported 10 cargoes so far, its fastest pace since 2017.
