Sentiment in the Brazilian spot diesel market turned sour Oct. 28 amid ample supply and following a downturn in international markets led by falling oil prices, market participants told S&P Global Commodity Insights.
While buyers have been bidding more aggressively since the previous week, a sharp drop in ultra-low sulfur diesel prices both on the NYMEX and the physical market in the US Gulf Coast prompted sellers to give in and move cargoes at steeper discounts.
Commodity Insights heard at least one 2,000-cu m ULSD cargo was sold at the southern Paranaguá port at a Real 120/cu m discount to Petrobras’ reference prices in Araucária, in the same Paraná state, on an FCA basis. In the southeastern port of Santos, just north of Paranaguá, offers were reported at a FCA Real 100/cu m discount to Petrobras’ Paulínia prices in the São Paulo state.
“I’m still in the market trying to find someone that will buy [at a Real 100/cu m discount in Santos],” one importing source said. “This [sudden drop] is a result of falling international markets.”
Another importer was trying to hold off from selling lower, offering at flat prices over Petrobras’ reference prices in the south-southern markets.
Recently, offers were being heard mostly at discounts closer to a range between FCA Real 60/cu m and Real 40/cu m over Petrobras’ prices at the Santos and Paranaguá ports. And despite low-volume trades being heard at a FCA Real 60/cu m at Paranaguá, buyers were bidding closer to a FCA Real 80/cu m discount.
Even though a few trades were reported, and some sellers decided to lower their offers, liquidity was limited. Market participants have been citing the seasonal drop in diesel demand in Brazil, the high inventories at ports and some large volumes being scheduled to be discharged in the coming weeks as reasons fueling a wait-and-see approach from consumers.
In the North-Northeastern Brazilian markets, offers mostly held close to Real 100/cu m over Petrobras’ refinery prices but sellers admitted those probably wouldn’t find a buyer.
At the Suape and Itaqui ports, ULSD was being talked at premiums of FCA Real 60/cu m to Real 70/cu m on top of Petrobras’ Ipojuca and São Luís reference prices, respectively. In the week before, at least one trade was heard at Real 100/cu m for 150 cu m.
Crude oil futures plummeted Oct. 28 as Israeli airstrikes on Iran avoided key oil infrastructure — the opposite of what was being expected. The NYMEX December WTI contract settled down $4.40 at $67.38/b, and ICE December Brent declined $4.63 to $71.42/b.
November ULSD contracts declined 10.95 cents to $2.1286/gal and December ULSD dropped 10.93 cents to $2.1398/gal.
Most of forward delivery in Brazil is priced against ULSD contracts on the NYMEX.
