Brazilian gasoline price gap to imports widens; no domestic increase in sight

The widening gap between Brazilian gasoline prices in the domestic market and import parity prices is driving a stronger demand outlook for gasoline relative to other fuels.

This trend suggests that consumers may favor domestic gasoline over imported cargoes, potentially influencing market dynamics and pricing strategies across the fuel sector.

That gap between gasoline prices sold in Brazil and abroad reached 5% on Sept. 6, according to fuel importers' consortium Abicom, as the US dollar remained strong against the local currency and there was a slight decrease in diesel prices in the international market.

Data gathered by the association revealed that the average price of gasoline sold in Brazilian refineries was Real 0.16/liter (3 cents) below the international benchmark. It showed domestic diesel prices were lagging to imports at an average 1%, or Real 0.02/liter.

The domestic price references were expected to stay stable for the next few days, according to Abicom chief Sergio Araujo.

"This uncertainty regarding the US foreign exchange should avoid higher gasoline prices for domestic production," Araujo said.

Platts, part of S&P Global Commodity Insights, assessed the Gasoline Itaqui Import Parity Price at $80.45/b Sept. 5, down 2.33 cents day on day. Platts' Gasoline Paranaguá Import Parity Price was at $80.79/b, also down 2.33 cents from Sept. 4.

Brazilian state-controlled Petrobras echoed that stability outlook by dismissing any plans to slash its prices to catch up with the weakening international oil benchmark. Petrobras CEO Magda Chambriard told journalists at a government event in Brasília on Sept. 4 that the firm was “comfortable” with its current refinery-gate gasoline values.

The announcement cooled tempers in the ethanol markets for the day. But spot prices for the biofuel have since dropped sharply as the gap between local and international fossil fuel values widened further, raising fears of a potential Petrobras’ gasoline price hike curbing hydrous ethanol’s competitive edge at the pump.

Hydrous ethanol – the standalone biofuel E100 – needs to be priced at 70% or lower than gasoline to be competitive and be attractive to drivers fueling their cars.

The hydrous ethanol price ratio to gasoline in Southeast Brazil, a region home to main consuming markets such as São Paulo, stood at 66% in the week ended Aug. 31, according to Brazilian oil regulator ANP’s latest retail motor fuel price survey.

Platts assessed hydrous E100 ethanol on Sept. 5 at Real 2,980/cu m ex-mill Ribeirão Preto, the main producing region in the São Paulo state countryside, a decrease of Real 70 from the previous assessment, as a pool of milling units spread across Araçatuba, Ourinhos and Ribeirão Preto microregions opened the counter with hydrous cargoes priced drastically lower than their competitors.

The move created a domino effect in the market, and similar reports were heard from traders in regions closer to big distribution hubs such as Paulínia and Guarulhos, with suppliers inclined to trim their initial offers as much as they could to entice buying interest and offload volumes in hand due to tanking space limitations.

In the greater São Paulo region, Platts assessed CIF Paulínia hydrous ethanol on Sept. 5 at Real 3,065/cu m, down Real 65 day on day.