Refined product prices tumble in Latin America despite rising July imports

Prices for delivered refined product cargoes to Latin America plunged July 5 on US recession fears despite significant regional imports from the US that sources said were shaping up to exceed the record level hit in April.

Platts assessments for eastern Mexico CIF cargoes dropped $23.09/b on the day to $138.04/b for gasoline and fell $14.88 to $150.12/b for ULSD, according to S&P Global Commodity Insights data. Platts assessed Brazil CFR Santos gasoline down $15.32 to $114.21/b and ULSD down $15.39 to $155.50/b. Ecuador RON 93 CIF fell $18.02 to $143.42/b and ULSD CIF declined $14.53 to $152.69/b. ULSD cargoes for Peru dropped $14.03 to $154.44/b and for Argentina fell $14.16 to $155.89/b.

Many of the prices reached record highs in early March right after Russia's invasion of Ukraine and again around the start of May. They jumped to fresh records in early June for gasoline and in mid-June for diesel. Eastern Mexico CIF gasoline was at a record $172.42/b on June 9, while CIF ULSD posted $184.92 on June 15. Argentina delivered ULSD on June 16 hit a record of $193.28/b

Although many prices are down 20% from those records, they are still at levels seen in mid-May. For instance, Santos ULSD, which was last as low on May 20 after touching $154.95/b, is off sharply from its record $190.45/b on June 16. Like many Latin American assessments, it first broke long-standing records on March 8 when it touched $183.83/b and had another run-up in April and early May.

Despite elevated prices, the US exported a record amount of petroleum products to Latin America in April, Energy Information Administration data showed July 5.

Total US refined product exports for April at 188.65 million barrels were only the third-highest, behind 191.1 million for December 2021 and 192 million for March 2022. However, exports to Latin America reached a record 99.26 million in April, accounting for 53% of US exports, the highest margin since December 2020. April exports from the US to Latin America rose 3% on the month and 18% on the year, with the bulk of the gains coming from the two biggest countries.

Mexico was the main draw as usual with a 5 million barrels rise to 41.06 million in April, reflecting only its sixth-highest total on record. Similarly, Brazil rose 3 million barrels to 14.62 million, registering its 10th-highest mark. Chile, however, did reach a record 9 million barrels mark, up 27% on the month and 5% on the year. Peru rose 7% on the month to 4.49 million barrels, Colombia dropped 23% on the month to 4.4 million, Panama fell 17% on the month to 4.1 million, Guatemala jumped 10% on the month to 3.43 million, Ecuador fell 54% on the month to 2.53 million, Argentina increased 16% on the month to 2.5 million, and the Dominican Republican was flat at 2.12 million.

The Latin American Oil Market Forecast, which was released June 30 by Platts Analytics, said Brazil's local demand prompted diesel imports to surge 90,000 b/d to 325,000 b/d in April, or more than a cargo a day. Platts Analytics expected imports to remain constructive, forecasting it up 20,000 b/d on the year depending on hurricane activity.

"On the import records, I think if Brazil and Argentina keep buying as much as they are, July will surpass those," one trader said. "But it depends on harvesting season and domestic production."

A shipping source noted that freight rates reached record levels in April because of the demand for loadings out of the US Gulf Coast, the main Latin American sourcing spot.

"But we are now in a sustained period of elevated rates in the USG," he said, adding that June loadings of 4.5 million mt were the same as in April.

Shipping fixtures just out for June 5 showed five new fixtures for USGC-Brazil routes, including four long-range 1 ships -- Nautical Janine, Aligote, Jag Aanchel and Jo Pinari -- capable of carrying 500,000 barrels and one medium-range vessel -- Green Planet -- capable of carrying 300,000 barrels that listed jet as its cargo. The first LR1 was for Brasket, with no product identified. The rest were for ULSD, the first was for Valero and the other two were for Petrobras.

Argentina's state-backed YPF, meanwhile, just agreed to buy eight to 10 ULSD cargoes for delivery in July and August, while wholesale power administrator Cammesa is said to have done the same for at least four of eight high sulfur diesel cargoes it asked for in that same time period.

A second trading source said the US is the only place with the spare capacity needed for Latin America.

"I think right now, most is coming from the USA. Europe has no surpluses. Asia also, no avails," he said. "The winter is very cold. Much cooler than previous years in all of the Latin Americas countries. That is a reason for more imports."

The US is the world's factory floor for refined products, he said, adding "There's no other source right now with the war in Europe."