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Brazilian drivers may continue to favor hydrous ethanol consumption despite oil price collapse: data

Highlights

Gasoline price for consumers lagging

Fuel consumption set to fall further

Santos — Despite the price collapse by international oil prices and the latest gasoline ex-refinery price adjustments, hydrous ethanol – E100 – is still technically offering an economic advantage for drivers in southeastern Brazil, government data show.

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In the week that ended Saturday, the hydrous ethanol price's ratio to its gasoline counterpart was 70.16%, up slightly from 70.04% in the prior week, according to data released by the National Petroleum and Biofuel Agency (ANP) Monday. Since January 6, E100 in southeastern Brazil lost a minimum advantage of nearly 2.11 percentage points in consumers' pockets.

Consumers with flex-fuel vehicles will generally use only hydrous ethanol when its price is 70% of gasoline or less because of its lower fuel economy.

In 2019, the southeast region accounted for almost 50% of Brazil's total hydrous and gasoline C consumption.

Hydrous ethanol is not losing its advantage on the fossil fuel mostly due to the lag between Petrobras' price adjustment basis ex-refinery and the time fuel retailers change their prices at the pumps.

Since January 1, Petrobras has cut its gasoline ex-refinery prices by 34%, while the average price for consumers in the southeast dipped 1.46% from Real 4.60/liter in January to Real 4.53/liter on Saturday, according to ANP data.

In the meantime, the average hydrous ethanol price for consumers rose roughly 0.5%, an extremely loose correlation with the ex-mill price so far in 2020.

S&P Global Platts' assessment of hydrous ethanol ex-mill Ribeirao Preto fell 9.56% from an average price of Real 2,51/liter in January to Real 2.27/liter Monday.

If the coronavirus outbreak had not started to trim Brazilian fuel consumption, hydrous ethanol sales would have retained a good pace, despite the turmoil in the international oil markets.

Brazil's largest distribution companies are expecting that fuel consumption will fall nearly 10% in March and further 30% in April due to the ongoing coronavirus lockdown.