Latin America dramatically decreases refined oil product tenders

Latin America has all but stopped issuing tenders to buy or sell refined oil products since the coronavirus reached the region, with tenders seen by S&P Global Platts down almost 80% from last year.

This April, S&P Global Platts reported just four refined product tenders awarded in the region, compared to 15 awarded in April last year. In March, Platts reported eight tenders awarded, compared to 29 for the same month last year.

Like nearly every other global fuel market, stay-home orders throughout Latin America have sharply curtailed demand. Since tenders are historically the main way Latin American markets trade fuel on the spot market, their decline is a reflection of a region at a standstill.

Additionally, buyers are not pressed for product due to accumulated inventory resulting from low consumption levels. This gives them an advantage, causing regional oil companies to opt for direct transactions where producers reach out to interested parties to sell their product, bypassing trading companies that low-ball suppliers, sources said.

"If [sellers] take their product out to the market through a tender, the companies who usually offer a higher price don't participate, and the large trading companies take the advantage and offer even less," one source said.

In line with these observations, of the four tenders seen by Platts for April, all but one sought to buy. The only tender to sell belonged to Petroecuador for fuel oil, which went to Vitol. But the status of this tender remains unclear because it was awarded before the state company halted production at both its refineries in mid-April.

Dominican Republic state company Refidomsa also issued a tender in April looking not only to buy gasoil but sell 50,000 barrels of jet fuel. Normally a net importer for all fuels, this was the first time the company looked to sell jet fuel via a tender, according to Platts.

Sources said the tender was a last resort, since it is unlikely a sale would pique any interest. Global airline passenger traffic in March was less than half of the year-ago figure, the International Air Transport Association said Wednesday.

"It's just no one wants to buy," a second source said. "If you have a bit extra of something, there's no storage. Neither sellers nor buyers have the storage they need."

SHIPPING DATA REFLECTS SLOW MARKET

US Gulf Coast fuel exports to Latin America have decreased in March and April compared to spot figures reported in 2019. Tankers making the voyage in the last two months have experienced long berthing delays in most countries as on-shore storage filled, and tight availability pushed freight to record highs in mid-April.

Freight for the USGC-Caribbean route was assessed at its peak on April 23-27 at lump sum $1.2 million, and the USGC-Chile route was assessed at lump sum $3.05 million April 23. Both rates were the highest observed since the assessments started September 2015.

USGC cargo inquiry decreased this week, with zero fresh cargoes reported testing routes for discharges in Latin America. US Energy Information Administration data for the week of April 24 showed total refined product exports for March-April decreased almost 2% year on year from 2019, with nearly a 9% drop for gasoline.

Platts clean tanker spot fixture logs showed 67 Medium Range tankers placed on subjects out of the USGC between March 1-April 28 for discharge in the Caribbean and Latin America. During the same period in 2019, 78 tankers were observed as booked for the same locations.

The total number of barrels shipped from the USGC to West Coast South America has decreased over 21% so far this year compared to 2019, according to cFlow, Platts trade-flow software. For East Coast South America, the number of barrels exported to Argentina and Uruguay in March-April decreased almost 5% year on year.

But the number of barrels delivered in Brazil in the two months increased year on year by almost 16%, with Platts cFlow data showing the imports evenly split between the two months. Brazil has not implemented a nationwide shutdown, though some governors and mayors implemented stay-home measures independent of the federal government.