FEATURE: Latin America's US oil product imports at prepandemic levels despite high prices

US refined product exports to Latin America have returned to prepandemic levels, and market sources expect more of the same as the strong summer demand and heat waves have increased tender activity.

Market sources said Feb. 2 that it feels like pandemic worries are weighing less on product import activity, despite high outright prices and heavily backwardated markets like diesel.

"The pandemic is still around, but it is summer time," a Latin America trading source said. "Everyone is going out, travelling, vacation, etc. Consequently, the volume is probably back to prepandemic levels."

The S&P Global Platts import parity price for Brazil ULSD rose 75 cents Feb. 2 to $114.69/b, the highest since Platts started calculating the import parity price in November 2018.

Platts' assessment for delivered ULSD cargoes into Eastern Mexico reached $108.26/b, the highest since its February 2016 origin and more than fourfold its $25.07/b low on April 27, 2020.

Gasoline has followed a similar pattern, although distillate importers are not keen on locking in prices for a two- to four-week journey with NYMEX ULSD futures for March 10 cents a gallon lower than February barrels.

"I have seen more activity," a second trading source said. "The problem we have now is that backwardation is keeping from holding more barrels than needed, so they bring smaller volumes at a time."

The US Energy Information Administration's weekly data released Feb. 2 showed US distillate exports at 527,000 b/d in the week ended Jan. 28, the fourth lowest weekly total since the EIA started reporting the data in 2010. While diesel exports slipped 16% on the week, gasoline exports rose 55% to 640,000 b/d and total product exports rose 10% to 4.34 million b/d.

Mexico top importer of US products

Monthly EIA data released Jan. 31 showed US refined product exports to Latin America grew 1% month over month in November, climbing to prepandemic levels in the second half of 2021.

Mexico pulled 40%, Brazil 14% and Chile 8% of US gasoline, diesel, propane and other products into the region. Latin America imported 87.6 million barrels of US refined products, representing 48% of the exports. Latin American demand has hovered around half of all US product exports in the last decade, but did drop to 38% in May 2020.

Mexico continued to pull the lion's share of US products, up 4% on the month at 35.2 million barrels, but down 4% from November 2020. With 381.1 million barrels imported in the first 11 months, it was on pace to match its 2019 total.

Brazil came in second in November at 12.2 million barrels, 23% higher than a year ago. Chile's volumes rose 10% on the month to 7 million barrels, 65% higher than a year ago. Colombia dropped 4% on the month but rose 65% on the year to 4 million barrels.

Traders see strong tender activity

Sources said imports have kept up the pace from December into February, with Argentina's Cammesa set to award a 900,000-mt tender for 18 cargoes of high sulfur diesel from February into April, the largest in years for the wholesale power administrator.

Traders cited other tenders, including another large tender from Cammesa for fuel oil, Colombia for gasoline and ULSD, Petroecuador for fuel oil, Uruguay for ULSD and the Dominican Republic for ULSD.

"There is a lot of stuff going on today," a third source said Feb. 2, adding that it has felt more active for months, especially with a heat wave hurting hydropower supply. "The lack of rain in South America is adding to the need for imports."

A Brazil trading source said private distributors were importing more, mostly because state oil company Petrobras has been supplying less. "So, it is not a matter of demand."

Brazil's National Petroleum Agency, or ANP, said Feb. 1 that refined product sales rose 5.9% on the year in 2021, with distributors selling 877.5 million barrels. ANP cited an expanding vaccination program that revived Latin America's largest economy, especially in the second half.

Just to the south, Argentina is asking for more tenders than seen in years, evident by a 320,000-mt tender for fuel oil for February through April after a 200,000-mt one in January that was the first for Cammesa since 2018. The first trader said the fuel oil and cleaner HSD tenders are needed to meet power needs due to "horrendous" record temperatures.

"Inventories are low because they had a heat wave a few weeks ago and had to import emergency cargoes," he said.