Latin American countries unveil tenders even amid record high ULSD prices

Delivered ULSD cargo assessments hit record highs from $183.45/b in Mexico to nearly $190/b in Argentina, even as Uruguay and the Dominican Republic broke the tendering silence March 8 with requests for new diesel cargoes.

ULSD led the global oil complex higher, as Europe is heavily dependent on Russia for diesel fuel and for the feedstocks needed to produce diesel. NYMEX front-month ULSD settled at $4.4373/gal, or $186.36/b, up 51.58 cents on the day and up $1.54 since Feb. 24, when the Russian invasion of Ukraine began.

A Latin America products trader said news that the US will ban imports of Russian energy products has companies in "survival mode." "Things are very quiet," he said. "I'm not working any tenders at the moment. Tricky times."

Latin America is a huge flat price buyer of refined products, mostly from the US Gulf Coast, and has large yearly and quarterly contracts still ongoing as evident by healthy cargoes en route to Chile, Argentina and Brazil. But new and smaller tender purchases have slowed noticeably this month, after a more than month-long wave that included Argentina buying 18 high sulfur diesel cargoes and Petroecuador buying nine HSD cargoes in early February. Only three tenders were heard last week, two for Peru for less than the usual volumes of distillates and one from the Dominican Republic's Refidomsa for gasoline.

On March 8, S&P Global Commodity Insights heard Refidomsa asked for a typical 220,000-barrel cargo of HSD but for a quick March 18-20 delivery, while Uruguay's ANCAP bought a cargo of ULSD from Trafigura for April 13-16 delivery at an 18.50 cents/gal premium to Platts US Gulf Coast waterborne ULSD, assessed March 8 at $4.5238/gal, or $190/b. The 51.98-cent rise edged past a September 2008 post-Hurricane Ike spike as the largest one-day ULSD increase on record.

Delivered cargo assessments for Eastern Mexico, assessed 7 to 21 days forward in a heavily backwardated market, rose $5.09/b to $147.71/b for gasoline, $21.9/b to $173.84/b for jet fuel and $22.09/b to $183.45/b for ULSD. Other delivered ULSD cargo assessments ranged from a $21.47/b increase to $183.83/b in Santos, Brazil, to a $22.4/b jump to $189.31/b in Argentina.

Traders don't expect many non-essential tenders, given the financial situation around lines of credit amid rising oil prices for buyers and sellers who still need to source the material.

"I think all the companies are being really affected on margin calls," said a second regional trader. "The price of crude is too high. Banks are having a hard time, as well as trading companies."

A third market source, however, heard rumblings that Chile's COPEC may be preparing for another large ULSD tender, maybe comparable to its October one for 36 tenders parceled out to companies like Pilot, BB Energy and Marathon over many months. Finding ships out of the USGC may be difficult. A wide-open Transatlantic arbitrage has sparked a revival of naphtha and ULSD movements to Europe from the USGC. On the other hand, Platts cFlow trade-flow analytics software shows at least eight product cargoes en route to Chile -- half of them from Asia.