Latin America fields diesel buy tenders again as gasoline prices push past ULSD

Argentina, the Dominican Republic, Peru and Chile have started buying distillates again and Colombia may have even switched from buying to selling ULSD, market sources said May 17, noting that the gasoline market has now picked up problems that had plagued diesel since the Russian invasion of Ukraine.

"I think the market on the distillates side is starting to come off," a Latin American trader said. "It's not the hype seen before. Gasoline is the real question. What will happen after Memorial Day?"

The US driving season starts in earnest after the end-May Memorial Day holiday, but finished gasoline prices on May 13 topped ULSD for the first time since in seven months for Platts benchmark pipeline assessments in the US Gulf Coast where most Latin American refined products are sourced, according to S&P Global Commodity Insights data. Latin American products have also flipped, with Peru import parity prices May 17 down $3.31/b to $162.77/b for ULSD and up 78 cents/b to $165.70/b for gasoline.

A Brazil products importer said they were paying more attention now to the gasoline market. "We had a short window when the international price was better than the domestic one. But that's already closed," he said.

Petroperu followed up a two-cargo ULSD tender awarded last week to BB Energy and Shell with a two-cargo light ends tender that was refiled May 17, a day after the original award date, but now with a delivery date pushed into mid-June. "I'm guessing they did not get any offers, so they delayed it by 15 days," the first trader said.

The disparity was noted in the market, where sources said distillates are especially playing catch-up in tendering ahead of the South American winter.

"It makes sense since the USGC basis has fallen 18 cents/gal the last couple cycles and waterborne premiums should be easing, too," a third source said. Waterborne premiums for loading in the US Gulf Coast plunged May 13 to pipeline plus 3 cents/gal for barges and cargoes compared with a 13.45-cents premium in mid-April, the highest level in at least seven years.

Argentina's wholesale power administrator, Cammesa, is said to have tendered again for three cargoes of high sulfur diesel and five cargoes of fuel oil for power generation, while YPF in Argentina was also asking for two cargoes of ULSD. Similar attempts months earlier for all three of the tenders ended in only partial awards due to lack of offers, high prices and market volatility, sources said.

Chile's Enex had a 2.4 million-barrel tender to buy ULSD, although the due date has passed without award. Dominican Republic's Refidomsa was heard to be asking for another cargo of HSD as well. This monthly tender has become among the most routine in a market where no tenders were heard for the first half of May and where diesel tenders had been otherwise canceled, reduced in volume, delayed or forced to pay much higher premiums since the Russian invasion increased prices to record levels.

Ecopetrol was also heard to have a tender for ULSD, but market participants were not sure if it was to buy or sell a cargo. Issues this year at Colombia's inland refinery have caused it to import more ULSD than usual, but it is one of the few Latin American countries capable of exporting ULSD.

It has not been heard to have happened since the last sell tender in December, however. But Ecopetrol canceled its last purchase tender in April, and one source said it may have already sold one ULSD cargo out of the Mamonal port refinery.

"For Ecopetrol, I heard they sent out" a tender," the first trader said. "But it's weird because people are saying its an FOB cargo."