Small-volume tenders emerge for high-priced diesel in Latin America

Latin American traders saw a few more tenders emerge April 20, although in smaller volumes as the market takes more tentative steps with freight and diesel costs declining from record peaks but remaining historically high.

Several sources said Vibra, Petrobras' former fuels-distribution unit BR Distribuidora, agreed to buy one ultra low sulfur diesel cargo from BB Energy for May 24-28 delivery into Brazil, while Dominican Republic state-owned oil company Refidomsa was again seeking distillates, this time 220,000 barrels of high sulfur diesel for May 8-10 delivery. Pemex trading arm PMI awarded Novum 180,000 barrels of low sulfur diesel for April 25-30 delivery, they added. ULSD is used more for road transportation, while low sulfur diesel and high sulfur diesel are geared toward power generation needs.

Prices were still high enough that several large tenders were heard to have been postponed, or possibly not awarded. Chile's COPEC was said to have delayed a request for three ULSD cargoes, while Petroecuador pushed back to April 26 from April 18 a tender to buy 1.96 million barrels of premium diesel. Raizen, another Brazilian distributor, was heard to have self-filled from its Brazil subsidiary for ULSD and gasoline tenders for its Argentina subsidiary.

Brazil import parity costs remain just under the March 8 record of $179.26/b, down $2.16 day on day April 20 to $175.54/b for ULSD IPP at Santos. Other IPP or delivered cargo assessments for jet, gasoline and diesel from Mexico to Argentina have seen similar slight declines but remain highly elevated, especially for ULSD markets.

Diesel or gasoil remains the sore spot as the loss of Russian supply in the global market has tipped the marginal barrels toward Europe instead of Latin America and other areas. Latin America also has come off a summer of big distillate demand for power generation because of heat waves, only to need more of the same to meet spring harvest and winter heating demand.

"The US sent a lot of product to Latin America for Cammesa and winter demand," one source said. Cammesa is Argentina's wholesale power administrator. He added that a drop from record prices has brought a few more companies out looking to fill immediate needs, especially with clean freight rates much lower and ships freeing up slightly after a flurry of fixtures in early April.

The clean lump-sum rate for US Gulf Coast to eastern Mexico for 38,000 mt hit a record $1.85 million on April 8, but dropped $100,000 on the day April 20 to $600,000, a level that was still in the top 10% of rates since Platts assessments began in 2015.The clean freight rate for USGC to Brazil for 38,000 mt ships reached a record w500 on April 6 for three days before backing down April 20 to w250.

"Clean has come way off," the first source said. "It's a touch softer, for sure."

A second source said people were waiting to see "if the Latin America world wakes up" once freight comes off. The short-distance USGC-Caribbean clean 38,000 mt rate reached a lump sum of $2.05 million on April 12, nearly double the previous record, but has since dropped to $800,000 April 20, in line with typical spikes since the assessment began in 2015. Refidomsa's high sulfur diesel award will avoid that peak rate, as happened with another tender the Dominican Republican entity awarded April 18 to Tartan/Pilot, for two cargoes of 100,000 barrels of ULSD to deliver May 9-11 and May 28-30.

The premium Refidomsa paid was heard in the low teens to S&P Global Commodity Insights' Platts US Gulf Coast waterborne ULSD assessment, or about twice as high as the premium on its last ULSD tender. But as a third source said, the diesel market is tight but workable, adding: "Recent awards are going to be much higher premiums."