Latin American distillate CIF, IPP prices fall from record highs

Delivered cargo assessments and import-parity prices for Latin American distillates fell from their record highs Jan. 24, mirroring US counterparts even as sources said there was steady summer demand in the region evidenced by strong diesel and jet imports.

S&P Global Platts assessed Brazilian IPP prices for the busy port of Santos for S10 ULSD down $1.23/b at $110.95/b, or Real 3,841.59/cu m, down Real 7.15/cu m. The IPP reached $112.18/b Jan. 21, a record since Platts started calculating IPPs in November 2018 to reflect the costs of importing barrels, from the product and freight charges to demurrage, fees and insurance.

Santos IPP prices for jet fuel reached a record $113.91/b Jan. 20 before falling 6 cents the next day and $1.87 Jan. 24 to $111.98/b.

Delivered CIF ultra low sulfur diesel cargoes also reached record highs for Santos, Eastern Mexico, Peru, Ecuador and Argentina Jan. 21, only to slip more than $2/b each Jan. 24. Platts assessed Santos CIF at $105.19/b, Eastern Mexico at $102.09/b, Peru at $106.14/b, Ecuador at $104.89/b and Argentina at $106.36/b. Platts began assessing all but Santos CIF cargoes in February 2016 and Santos in August 2018.

"ULSD demand is steady," one Americas products trader said. "I'm seeing quite a bit of gasoline demand in West Coast South America and Argentina. Brazil may pick up too if oil prices drop further."

The pricing trends match prices in the US Gulf Coast, from where most Latin American countries source their imports, especially for distillates. USGC diesel and jet assessments fell from seven-year highs reached late last week, but gasoline assessments fell shy of October and November seven-year peaks.

Santos gasoline IPP prices fell 88 cents to $98.50/b Jan. 24, a trading day away from when it edged near a high recorded by Platts of $100.18/b Oct. 20.

A second market source said underlying Gulf Coast prices coupled with summer energy consumption in South America supported higher prices.

"There were record high temperatures in Argentina, and they had to import ULSD and fuel oil for their electricity generation plants," the second market source said. "There were some ULSD cargoes that went from Brazil to Argentina in late December," showing imports didn't just come from the US.

Traders, regulators and others use IPP prices to gauge international arbitrages over local prices, but they do not always match posted prices within the countries. In Brazil, state oil giant Petrobras increased diesel prices by 8.1% and gasoline prices by 4.9% Jan. 12. Petrobras is bound by a 2019 antitrust agreement to price wholesale diesel and gasoline at parity with international imports. Brazil has historically imported about 25% of its diesel and LPG needs as well as about 15% of its gasoline consumption.

Platts cFlow trade-flow analytics software showed 25 possible product cargoes being imported Jan. 24, with the vast majority arriving this week and only five in February, a sign that most were contracted before the recent price run-up. Most were fully-laden MR-sized cargoes capable of carrying 300,000 barrels of diesel, jet fuel, gasoline or other clean products, with origins from India and Singapore to Europe and the US.