Latin American refined-product tender volumes drop as fuel, freight rates jump to record

High supply prices and low freight availability have hindered the number of refined products cargoes that Latin American entities are receiving, especially for distillates.

Sources said that Argentina's Cammesa in the week ending April 9 only awarded three cargoes of a five-cargo tender of high sulfur diesel and three cargoes of fuel oil out of a seven-cargo tender for fuel oil, with delivery starting in May. Last week, Petroperu was heard to have awarded only seven out of the 11 cargoes it had requested for diesel and biodiesel.

Smaller tenders have been canceled or reduced as well, but requests are hitting the market again. In late March, Petroecuador broke a month-long dry spell for big Latin American tenders, awarding 1.96 million barrels of 50 ppm premium diesel in seven cargoes to Glencore, but the state oil company paid a $7.45/b premium, compared with discounts in the previous two tenders. Petroecuador has unveiled another similar tender, due April 18.

"People are not liking the price," a trading house source said. "With freight rates at all-time highs, people are awarding front volumes and hoping for better values in the back."

It's not just the open tenders, either. The Russian invasion of Ukraine has pulled more US Gulf Coast ships to Europe to offset Russian diesel supply. So, offers are also harder to find for diesel markets from Mexico to Brazil that don't advertise through tenders.

"We're in the market this week to buy for May delivery," a Brazil source said. "But the number of offers is much lower than last year."

Despite record high diesel prices in Latin America and elsewhere, the Brazil source said demand remains very strong. Brazil had a greater dearth of cargo offers in March, but has been able to find them in April, although not always from the US Gulf Coast, the default source for distillates.

"Yesterday, we heard some barrels came to Europe and for a short period of time Europe became long and we had an opportunity to take barrels from them," the source said. "We market is really tight. But we are seeing the arb [arbitrage] open from Europe and PG [Persian Gulf] and India. We are getting successful so far."

"It's the opposite in Argentina," he added. "In Argentina they were suffering."

Cammesa, the Argentinian wholesale power administrator, was heard to have awarded PetroChina two cargoes and Vitol one cargo of the reduced HSD tender. Argentina had been asking for more tenders than seen in years to restock after meeting power needs due to record temperatures. But the country is also in need of ULSD supply, with a trade group citing rationing at service stations ahead of the spring harvest due to reduced imports because local price controls keep pump prices 30% lower than import prices.