Brazil’s Center-South market sees no shortage of fuel after Refit stoppage

Brazil's Center-South fuel market has not shown any signs of a shortage after private refiner Refit's shutdown, market participants and officials told Platts.

State-controlled oil giant Petrobras, along with the country's largest distributors, have stepped in to meet most of the regional demand previously covered by Refit.

Brazilian oil and gas regulator ANP stopped Refit from moving or blending any material in its Manguinhos refinery Sept. 26 after a tax, quality and safety inspection found storage, import and refining irregularities.

Refit supplied roughly 20% of the Rio de Janeiro market and 10% of the São Paulo market, leading to local anxieties about supply security since its shutdown. Freight brokers and logistics companies also reported a shortage of trucks for return shipments between the Southeast and Center-West, as much of the refined products flow between these regions previously originated from Refit.

'There are enough stocks'

ANP, however, told Platts in a statement Oct. 1 that it had not identified any supply disruptions and was in ongoing communication with market agents, including Petrobras, which has ensured its ability to meet market demand.

"ANP always assesses market impacts when conducting operations," the agency said. "In Refit's shutdown case, there are enough stocks to meet demand. Refit's market share in the state of Rio de Janeiro is comprised mainly of unbranded fuel stations, which can buy from any other suppliers."

Since the shutdown Sept. 26, fuel importers and distributors have reported an increase in diesel and gasoline inquiries in the Center-South, although the market buzz had yet to fully translate into higher sales volumes.

"Some people who I hadn't heard from in a while came looking for product," a fuel importer said. "I don't think there is a shortage risk. What could happen is a general rise in market levels."

Sources familiar with the market also highlighted that distributors associated with Refit had about 90,000 cu m of fuel stored outside the refinery, including in Sao Paulo, before the shutdown.

Representatives of Brazil's fuel market announced the formation of a supply task force Sept. 29 to support distribution in Rio de Janeiro and São Paulo.

Adapting to meet demand

Petrobras said it was open to additional volume requests in October, according to sources at major and midsized distributors. The company also adapted fuel distribution logistics to meet demand, a spokesperson from Brazil's Oil and Gas Institute, or IBP, told Platts Oct. 1.

Refit wrote in an Oct. 1 statement that the 11 issues identified by the agency during the inspection don't meet the legal requirements for a shutdown under Article 5 of Law No. 9,847/1999, as they don't pose risks to consumers, public property or the environment. The refiner also said there were no discrepancies between the product quality it has declared and the quality of volumes inspected by ANP.

"Refit has sent a formal response to ANP affirming it has started to meet all the requisites laid out by the agency to justify the shutdown," the company wrote. "Refit highlights it took knowledge of the shutdown through the media before receiving a formal notification from the agency, and the vague accusations of fraud and lack of refining made by the agency to the media are not in the notification."