Peru cancels, rebids tenders to cope with high Latin American ULSD prices

Peru has canceled two distillate tenders, awarded only one light ends cargo out of three for another tender, and put the other two cargoes up for rebid March 21, sources said, reflecting Latin American entities' struggle in coping with high diesel and gasoline prices.

Crude futures settled sharply higher March 21 on the possibility of EU sanctions on its key Russian supply, with ICE May Brent up $7.69/b to $115.62/b. NYMEX April RBOB futures settled 13.28 cents higher at $3.3716/gal, and April ULSD finished 20.28 cents higher at $3.8009/gal.

Diesel and gasoline have mostly outpaced crude oil's price increases in March, evidenced by crack spreads that have blown out to some of the highest levels on record.

Russia supplied Europe with diesel and naphtha, forcing Europe to turn more instead to the US, the main sourcing hub for Latin America. The naphtha switch has also hurt Brazil more than usual because it needs a naphtha blend instead of finished gasoline due to its higher ethanol standards.

Crude prices also dropped more last week than diesel and gasoline as news of China's coronavirus lockdowns prompted concerns of demand destruction for crude.

Platts cargo assessments for Eastern Mexico rose $5.34 to $133.85/b for gasoline, $6.23 to $149.66/b for ULSD and $6.03 to $146.47 for jet fuel March 21, according to March 21 data from S&P Global Commodity Insights. Similar hikes were seen in Brazil, with Santos ULSD S10 CRF up $5.97 to $151.02/b and gasoline up $5.54 to $129.10/b.

The cargoes were mostly priced 15-30 days out, so a large backwardation for distillates tempered their price increases. But import parity prices, designed to reflect the prevailing three days of local prices, rose $9.20 to $155.64/b for ULSD in Peru, jumped $9.39 to $149.95/b for ULSD in Colombia, and increased $9.41 to $157.34/b for ULSD in Santos, S&P Global data showed.

State-owned oil companies continued to cope with high prices by holding back as much as possible on tenders, or canceling or rebidding ones already issued. Petroperú, for instance, awarded Marathon only one out of three cargoes in a light ends tender issued March 14, and reissued the other two cargoes March 21 in a new tender with similar dates and specs, sources said. Marathon was heard to have provided the only offer only for the second cargo of cracked naphtha and HOGBS to be delivered in May.

A source said that two other tenders dating back to early March for two split cargoes of ULSD and jet fuel and for diesel and biodiesel were canceled.

Petroperu had sought one 320,000-barrel cargo of B5-S50 diesel/biodiesel for delivery April 4-8, with offers due March 8. Another tender, due March 4, asked for one cargo of 10,000 barrels of ULSD and 110,000 barrels of jet fuel for delivery for delivery March 15-18.

Sources called it an emergency purchase at the time, but never heard of any award. IPP prices at the time for Peru hit $157.70/b for ULSD on March 4, almost equal to current prices, with wide swings up and down since then.