Brazil updates diesel reference prices, names first companies for subsidy phase

Brazil's Oil, Natural Gas and Biofuels Agency, which began publishing a diesel price cap on April 1 to determine subsidy eligibility, has released reference prices valid for April 4-7. The figures remain in line with Platts' calculations based on the ANP's public formula.

The reference prices released for the April 4-6 period are: Real 5,987.3/cubic meter for the Southeast region, Real 6,006.0/cubic meter for the South, Real 6,203.3/cubic meter for the Center-West, Real 5,972.4/cubic meter for the Northeast, and Real 5,998.9/cubic meter for the North.

Since April 3 was the Good Friday federal holiday in Brazil, and ANP's formula tracks Platts assessments from two business days prior to publication, April 2 prices have been used as the reference for this whole four-day period.

In a related development, the agency, or ANP, also published the list of the first companies authorized for the initial phase of the subsidy program. The authorized companies are: Sea Trading Comercial Importador A E Exportadora; Petrobras; Midas Distribuidora de Combustiveis; Refinaria de Mataripe (Acelen); Sul Plata Trading do Brasil

The calculation for the daily cap uses a formula made public by the agency on March 27. It takes into account a fixed price previously published by the Ministry of Mines and Energy, or MME, and daily variations in Platts assessments. Each region uses its own weighted average of different Platts import parity prices, while the reference for all of them gets discounted based on Platts DAP cargo US- vs all-origin spread.

The ANP's calculation formula uses Platts' March 18 assessments as its base price.

Platts, part of S&P Global Energy, FCA assessments for ultra-low sulfur diesel, or S10-grade diesel, on April 4 were above the ANP's reference prices for April 4-6 across key Brazilian ports. In the southeastern port of Santos, the Platts S10 FCA price was assessed at Real 6,112.60/cubic meter, a premium of Real 125.30 to the ANP's cap of Real 5,987.30/cubic meter for the region. In the South region's Paranaguá port, the Platts assessment of Real 6,243.80/cubic meter was Real 237.80 above the cap. In the Northeast, Platts assessed S10 FCA Suape at Real 6,108.90/cubic meter and FCA Itaqui at Real 6,094.50/cubic meter, representing premiums of Real 136.50 and Real 122.10, respectively, over the region's cap of Real 5,972.40/cubic meter.

The Brazilian government decided March 12 to launch a subsidy program to curb soaring diesel prices for consumers in the country. The plan is to offset Real 320/cubic meter from costs paid by importers and refiners as long as they sell below a price cap. That limit varies depending on whether the company imports or refines third-party crude, or makes diesel from its own feedstock.