Latin America slows oil product tendering as prices hit 9- to 13-year highs

Latin American refined product prices spiked $7/b to $16/b March 2 amid global volatility, and these rising prices have triggered a pause or cancellation of buy tenders, especially in the ULSD market as prices broached 2008 levels in the heavily sourced US Gulf Coast.

Refined product prices from Mexico to Argentina are likely at highs unseen in nine to 13 years, following patterns elsewhere in the world. The NYMEX ULSD front-month futures contract jumped 34.36 cents to settle at $3.4947/gal March 2, while NYMEX RBOB settled at $3.3083/gal, up 21.96 cents. Latin America sources its diesel mainly out of the US Gulf Coast, pricing against Platts assessments by S&P Global Commodity Insights for ULSD pipeline -- which rose 36.36 cents to $3.5472/gal March 2, the highest since July 30, 2008, when it was $3.5658/gal.

"Everybody is worried about an increase in fuel prices locally," a Latin American market source said. "Crude oil is very high today. That will affect products, especially to the countries that are importers."

For delivered cargoes, Platts assessed CIF Eastern Mexico up $9.80/b to $129.64/b for gasoline, up$16.39/b to $142.99/b for ULSD and up$14.37/b to $141.04/b for jet fuel. ULSD saw the biggest increases across the region, with Brazil CFR cargoes to Santos jumping $15.80/b to $144.99/b, Argentina CIF ULSD up $16/b to $148.77/b, Peru CIF ULSD up $15.78/b to $147.18 and Ecuador CIF ULSD up $15.78/b to $146.68.

Import parity prices designed to reflect the cost of local product based on the three prevailing days average did not increase to the same degree for ULSD, but rose $11.15/b to $137.84/b in Peru, $11.02/b to $132.20/b in Colombia and $11.39/b to $139.82/b in Santos. The Brazilian city of Betim registered the highest ULSD IPP price, up $11.40 to $146.01/b.

At least three tenders were canceled in recent weeks, two in Peru and one in Argentina, while numerous other awards seemed to be on hold and new tenders have dried up noticeably. Several sources said a Petroperu tender for a split ULSD and B100 biodiesel cargo has not been awarded even though the state-owned oil company agreed earlier in the week to pay Chevron for a ULSD/jet cargo placed into the same tender.

"The problem is who is going to offer anything under the current circumstances?" asked a second Latin American products trader. "Ukraine is a major producer of sunflower oil. I'm pretty sure sourcing any bio at the moment has to be very difficult. So, I'm not sure if you want to offer something you are not able to source."

The first source said Europe was already a priority for cargoes of LPG and distillates in the months leading up to Russia's invasion of Ukraine. Russia is a major exporters of diesel to northern Europe.

"I think refineries in the US are shipping products to Europe," he said. "If LatAm asks for a tender, maybe they will not get offers."