Podcast
Apr 10, 2025
More players bring competition to Brazil's refined products markets
Refined Products, Chemicals, Agriculture, Gasoline, Diesel-Gasoil, Aromatics, Biofuel, Oilseeds April 10, 2025 More players bring competition to Brazil’s refined products markets Featuring Jeff Mower, Renato Rostas, Isabela Rocha, and Kauanna Navarro "O Petróleo é Nosso," or "The Oil is Ours," was a popular slogan central to the founding of Brazil's state-owned oil company, Petrobras, in 1953. The slogan can also be interpreted more broadly, as Brazil's refined products markets have opened to more participants, leading to a surge in spot market activity and price transparency. As a result, Platts has launched new price assessments for Brazilian gasoline and diesel. How did those spot markets evolve? Why is the Northeast so reliant on imports? How are renewable fuels playing out in gasoline and diesel? Jeff Mower discusses these topics and more with Renato Rostas, manager of the Platts Brazil refined products team, and Brazil gasoline and diesel price reporters Isabela Rocha and Kauanna Navarro. Links: Gasoline FCA Suape BRL/CBM GASCA00 Gasoline FCA Itaqui BRL/CBM GASCC00 ULSD S10 FCA Paulinia BRL/CBM ULFCI00 ULSD S10 FCA Araucaria BRL/CBM ULFCK00 Also on: Spotify | Apple Podcasts View Full Transcript Jeff Mower: Hello and welcome to the Platts Oil Markets podcast by S&P Global Commodity Insights, where today we will be discussing the evolution of Brazil's spot refined products markets. I'm Jeff Mower, director of America's Oil News, and with me is Renato Rostas, manager of Platts Brazil refined products team, Isabela Rocha, Brazil gasoline price reporter, and Kauanna Navarro, Brazil diesel price reporter. Brazil's spot refined products markets have grown in recent years. Petrobras, Brazil's state-owned oil and gas company, dominated the market for gasoline, diesel, jet fuel, and other refined products for years. The company built up its refining capacity during the first two decades of the 21st century and still owns the bulk of refineries. However, a number of private companies are now participating in the spot market, providing some competition to Petrobras, as demand for imported fuel has climbed, specifically in the northeast. As a result, having seen an increase in trading transparency, Platts has launched some new refined products price assessments in Brazil, something we will be discussing today. Renato, let's start with you. I'm curious about the history of it here. I know it's something that's taken a while. Opening Brazil's refined products market to competition was a bit of a lengthy process, right? I mean, Petrobras held a monopoly until the late '90s. How did that change come about? Renato Rostas: So Petrobras actually started kind of letting go of the monopoly then, but even if they weren't the only ones producing oil and refining oil, the thing was the bulk of distribution was still being done by Petrobras, and also, most of the imports also were being done by Petrobras. So a lot of the market was in their hands, and it still is, to be honest. But the thing is, after around 2014, 2015, we had something called the Car Wash investigation here in Brazil. It was a big corruption scandal and Petrobras was in the forefront of that operation. And what it made happen was that the then-president got impeached, and then a new administration took office in Brazil, President Temer, and they started arguing, of course, that Petrobras was involved in that corruption scandal. And also, after huge losses in their distribution arm basically, the refining and distribution arm mostly, they argued Petrobras had to sell non-core assets and focus on exploration and production, which was then considered their strengths, right? So what happened was during, for example, 2014, Petrobras had $16 billion in losses for their refining and distribution arm, and in 2013, it was $8 billion. So a lot of that has to do with impairments and asset write-offs related to Car Wash, but also the scenario was Petrobras was importing a lot of fuels, diesel and gasoline and jet fuel, at higher prices because the international markets oscillate, they're volatile, they change every day, and a lot of the times the price, the external price, was higher. And when they imported that, they were selling at their own posted prices, which were, for a while, frozen basically at much lower levels. Jeff Mower: Was that politically-driven? Was that a design as a state-owned company, like, "You have to sell at some sort of subsidized rate"? Renato Rostas: Yes. Brazil is very dependent on road freight. So a lot of the goods that we move around the country are transported via trucks, so diesel is a main component of price inflation in this country. And also, we do have a lot of cars in general, just light vehicles, passenger cars. So by keeping those prices low, the government was trying to contain price inflation. That was absolutely one of their goals. And then after the president got impeached and a new administration took over, they started trying to sell those non-core assets and follow international markets. So something called the import parity price started being followed, which is basically a calculation of the NYMEX price for ULSD or RBOB, diesel or gasoline, plus a freight and plus all the costs needed to bring those to Brazil. And Petrobras was following that closely. So their domestic price got more volatile, and I mean, basically following market trends. Jeff Mower: And I'm curious, how did the people of Brazil respond? Renato Rostas: Yeah, so there were a lot of protests, truckers. There was a trucker protest that basically made Brazil stop. They refused to go on because of how high diesel prices were and their fees weren't moving in tandem, not fast enough at least. So they were losing money because of that policy. And this is something that it went on for like two to four years, that Petrobras was following more closely these import parity prices, which by the way, Platts publishes and the Brazilian petroleum regulator, ANP, uses Platts import parity prices for their own calculations. But during that period, they also sold a few refineries. The biggest one is Mataripe in the northeast, which is now owned by Acelen, which is a company controlled by the Abu Dhabi sovereign fund, Mubadala it is called. And they sold another refinery in the Amazon. And in the end, the BR Distribuidora, which is their distribution arm, they went public and during a period of time, the government was selling their stake in BR. So in the end, it got completely privatized and it's now called Vibra Energia, which is the largest distribution in Brazil. So what happened was Petrobras exited the distribution business, they sold a few refineries, so there's more competition there, and they were, for a while, for a few years, following external trends. So these made the market more dynamic here in Brazil. Jeff Mower: They sort of stopped at a certain... Originally, they were going to shed how much of their refining assets? Were they going to shed all of them at some point? Renato Rostas: Not all of them. The plan was to sell a big portion of the assets. There was another one that was almost sold, but then the administration changed. Jeff Mower: Yeah. Why is that? Come on. It seems like they're holding back now, right? Are they holding back now? Kauanna Navarro: Yeah, the initial plan was selling the refineries that wasn't really part of the core business, not a primarily more important for diesel or gasoline, keeping focus on owning diesel and gasoline and asphalt, for example, would be a refinery really interesting to sell because it's not deeply related to their core business. Like this one from Acelen, this refinery was a really great producer of base oil. So the initial plans was, "We are selling some refineries that are not deeply related to our core business," but the plans just change it. Jeff Mower: Now you had mentioned, Kauanna, you had mentioned that these refineries are also producing diesel? Kauanna Navarro: These refineries, some of them are producing diesel, but not the main producer of diesel. They do have Reduc that produce base oils, but also produce a lot of diesel that supply the southeast. So they are keeping focus on sell some refineries that are not deeply related to their core business, or they are not really the main business of Petrobras regionally. We were always short of gasoline and diesel in northeast anyway, so they decide just to sell these refineries and keep focused on their strengths. Jeff Mower: Yeah. So I'm glad you mentioned that because I do want to ask you about it. Why is it that the northeast is so short specifically? I mean, on diesel and gasoline, and we can talk about diesel. Kauanna Navarro: First of all, because we do have less refineries over there. So we refine less and we do produce less. We do produce a lot of in south and southeast, but we just transport those in trucks in Brazil. And it is too expensive to take something from like Rio de Janeiro and transport to northeast or north, that even worse, because our roads are not in a really good situation. So it is expensive to transport by trucks, but also the roads are not that good in north and northeast, some of them. So it's more interesting to buyers just imports, even Petrobras, even Petrobras use it to import a lot of the supply they offer in north and northeast. Now, we do have more distributors. So not only Petrobras, other players are also importing. Jeff Mower: And where are those imports coming from mostly, the diesel imports? Kauanna Navarro: The diesel is mainly from the US, US Gulf Coast, and now with the Russian-Ukraine war, from Russia. Russian, it's the biggest supplier. They dispute barrel per barrel with US Gulf Coast. Sometimes they are in the first, sometimes they are the second. Before the Russian-Ukraine war, we do see more products coming from India and Saudi Arabia, and we sell less, mainly because of the price. Yeah, we don't have sanctions that impede us to buy from Russia. So Brazil, it's a really interesting place to put Russian diesel products over here. Jeff Mower: Yeah, I think that's one of the interesting things about the sanctions on Russia was some people think that, well, I know some countries have sanctioned Russian fuel, like the US doesn't bring in Russian oil, but for the most part, it's a price cap and there's really no Russian barrels. If anything, the sanctions just caused a redirection of flows around the world and I think Brazil's an excellent example of that. So I always actually wonder, well, I guess we'll find out, what happens if those sanctions are lifted at some point. I guess it will just go back or do they have term deals? Have they set up term deals with Russia? Kauanna Navarro: That's a million-dollar question, but I do think markets always find a way, right? Jeff Mower: Mm-hmm. Kauanna Navarro: And this way to Brazil, it's already built, so it's unlikely to see Brazil not buying any diesel product from Russia just because the sanctions are not there anymore. And the Russians can supply Europe again and everything come back to the first stage. I don't think so because we do already have this path to bring products from Russia. And it's always interesting to have how to diversify the countries you send your products, and that for us, it's also interesting to buy from more and more sources. I think Renato is going to add something about sanctions because we can buy from Russia, but not all companies can buy from Russia. Jeff Mower: Oh, really? Renato Rostas: Yeah, no, we have just a few entities that are mainly entities that are public, like on the NYSE or in Europe, for example. Jeff Mower: Oh, sure. Renato Rostas: Or companies that are owned by US groups. And there are a few companies that they cannot buy Russian diesel because of that. Kauanna Navarro: Like Petrobras. Renato Rostas: Petrobras themselves, exactly. Kauanna Navarro: Doesn't buy Russian diesel, and they are imported from India and Saudi Arabia, not only from the US. Jeff Mower: And the US? Kauanna Navarro: Yeah. Mainly when we do see the lineups coming from India or Saudi Arabia, usually, it's Petrobras buying because they can't buy from Russia. And sometimes these arranges are cheaper, just cheaper than the US. It depends on the market dynamics. Renato Rostas: So this is an interesting dynamic because Petrobras still imports. They import close to 20% of everything that is imported in Brazil, for example, but they do not distribute anymore. They sold the distribution arm. So there's more competition, like in this midstream, let's say, part of the value chain. So there are more distributors competing for more market share than they could in the past. So this helps to create a more dynamic spot market as well. Jeff Mower: I was going to ask Isabela about gasoline as far as the main exporters of gasoline into Brazil. Isabela Rocha: Yeah. I think, I mean, the diesel and gasoline markets in terms of importing dynamics are similar, but gasoline is especially short in the northeast, I think maybe a little even shorter than diesel. So there is a lot of opportunity there for distributors and private companies to import product. At the same time, we've been hearing that demand has been lukewarm in the region since the start of the year. So there are not many ships coming in when you look at the lineup and the cargo expected to come in. But the main importers of gasoline into Brazil tend to be the US, the Netherlands, and Russia. But it's a different dynamic to Russian gasoline than it is to Russian diesel because the quality of the gasoline coming in doesn't have to be as good because we mix gasoline with ethanol before we sell it at the pump. Right? And ethanol increases the octane of gasoline, so you don't have to bring a very high-quality gasoline into the country. So what they do in Russia is, even though there's a ban in gasoline exports there, many participants bring naphtha, which is a lower-grade product, and then they blend it up and sell it here as gasoline because there's no minimum required specifications for gasoline coming in. The test that the Brazilian government does is when this product gets mixed with ethanol, does it meet the specifications needed to be sold at the pump? Jeff Mower: And what's the percentage there? It's a pretty high percentage of ethanol? Isabela Rocha: Yeah. Currently, it's 27% of ethanol that it's mixed with what we call Gasoline A, like the A-grade gasoline, that it's the gasoline that it's pure. And then yeah, the government is studying to increase that blend to 30%, and what we've been hearing from participants is that this might be approved by the end of the year. Jeff Mower: So that would reduce the demand for gasoline imports, right, because you'd be blending more ethanol? Isabela Rocha: It could. Yeah, it could. And there's also an interesting discussion about how Petrobras's gasoline is a little better quality than the gasoline coming in. The gasoline Petrobras refines and sells, it's a little better quality. So there's also a discussion about that. Importers could bring cheaper, lower-quality product, maybe there could be a price dispute, or you know, whenever that blend increases Jeff Mower: Are the refiners pushing back on that increased blending? Renato Rostas: So it's an interesting scenario right now because for ethanol, I don't think there's that many complaints or pushbacks, really. It's something that is more cultural in Brazil to use a lot of ethanol in our gasoline. We use ethanol as fuel as well. Hydrous ethanol, it's a big part of passenger cars use in Brazil, and probably the government is set on going to a 30% blend in gasoline. But what we've been hearing is a pushback for biodiesel. That's a whole nother story. Jeff Mower: Oh, sure. Renato Rostas: Because we blend 14% of biodiesel into the final diesel that goes to the pump or to the direct retail. And the government passed a law that says that it's going to increase one percentage point per year, so it should be going to 15% this year. But as biodiesel prices have skyrocketed, and mainly the distributor margins have become more slimmer, let's say they've gone down, they actually requested the government to pause that mandatory biodiesel blend for a while. Jeff Mower: That's interesting. I'm curious about the biodiesel itself. The supply is more limited. I mean, the ethanol it comes from, correct me if I'm wrong, is sugar, sugar-based, right? Renato Rostas: Sugar cane, yes. Jeff Mower: Sugar-based, yep. But the biofuel, where is that coming from? Where are the blendstocks, or no, I'm sorry, the feedstocks, where are the feedstocks coming from? Kauanna Navarro: Soybean. Jeff Mower: Soybean? Okay, gotcha. Kauanna Navarro: Essentially biodiesel here in Brazil came from other sources, for sure, but the main source is soybean oil. So what is happening? Many things are happening and we do have a lot of soybean for sure because of that. Our biodiesel came from soybean. But we are seeing the commercial war getting more crazy today. So China is demanding more and more soybean from Brazil instead of came from the US, so it's more interesting for our suppliers to sell overseas our production, as they always do. We do produce a lot of soybean because of overseas demand, not our internal demand. Still, we need some soybean to produce soy oil and produce biodiesel and other things over here, and it's getting more expensive. Essentially, the price is hiking and the distributors complained and complained a lot during the earning calls about some other distributors not really putting the 14% of biodiesel into the blending and it's getting really unfair competition over here. Jeff Mower: That's interesting. Kauanna Navarro: It's something they complain about and the government is studying some groups in order to control the situation better. But what we are getting from the market, and I particularly think it's going to happen, it's probably they will postpone this increase until next year, March next year, when we should see another biodiesel increase in Diesel B. Jeff Mower: So it's really a matter, the price hike is really a matter of feedstock supply, not the capacity to turn that feedstock into biodiesel, plant capacity? Renato Rostas: Yeah, plant- Kauanna Navarro: The problem is not... We do have capacity to supply, but the price is hiking because we send our production overseas, but we do have this capacity to supply the 15%. Jeff Mower: Do they have tax credits? Do you have tax credits in Brazil to produce that biodiesel for biofuels? Does that help incentivize that production? Kauanna Navarro: Go ahead, Renato. Can you add something about that? I don't think we do. Renato Rostas: No, no. Not in that sense of getting tax credits because, well, it's already mandatory to blend 14% biodiesel, for example, right? Jeff Mower: Okay. Renato Rostas: But some states do have some kind of incentives to bring in, but this is mostly for ethanol, not for biodiesel, yeah. And also, another thing that I just wanted to chip in to say, we not only do have capacity to make that biodiesel from soybean oil, we are also trying to recycle, like use cooking oil, use beef tallow as a feedstock. So we also have alternatives, so it's not a capacity issue. Jeff Mower: Okay, fair enough. We briefly mentioned at the beginning of the podcast you launched some new assessments recently so I want to get into those. Maybe explain what was the new assessments and what was behind them, especially let's start with gasoline. Are both the gasoline and diesel assessments in the northeast or you have inland assessments as well, is that correct? So maybe starting with gasoline. Isabela Rocha: Yeah, we first launched the assessments, this is a new team, we first launched our assessments in December. They were diesel assessments for Brazil's four main ports. And I think, I mean, Renato can talk a little bit more about that, but the gasoline and diesel market structures are pretty similar, especially in the ports. So I think it was natural to us to expand gasoline to the ports because we were already in touch with the participants there. And I think for gasoline, especially in the northeast, there's liquidity at the port because of that need for imports to come in, so it's a market that it's, let's say, good to start with because there is a good volume of information every day. Usually, there's more gasoline that has a little bit less liquidity than diesel in general. But whenever imports come in, this liquidity is more injected and so we hear more negotiations on that end. And yeah, what's especially interesting about the port markets is that because there's a lot of imported product come in, the external market outside of Brazil, like NYMEX and crude levels also really influence prices. So it's a very dynamic market to assess. There's like price fluctuations almost every day. So I think it's a really interesting market in terms of volume of information and how dynamic it is. The reference price changes a lot, so that's what we're here for, right? Jeff Mower: I think that's interesting. For our listeners who aren't familiar with how markets develop like that, it's a good idea to just walk them through it. What makes a good spot market? I mean, so much of a market, like let's say oil can be termed-up, like let's say you have long-term agreements, Company A will sign a multi-year agreement for supply with Company B, but when a spot market develops, that means you just have more extra supply. For those listeners, right, is that what you're getting at? So how do you... And that's what I find really fascinating about what we do here is we're gathering that information, that trade and price information, but then turning that into an indicator, right? But it takes a level of transparency to get there. Renato Rostas: Of course. So two things I wanted to say is, one, it's how important it is that more companies or more participants are importing the either gasoline or diesel and from Russia and from the US and they're also some of domestic supply is blended in at the tank. So it basically becomes Brazilian diesel, we call it, the ULSD, we call it S10 Diesel here. So the origin is not... It becomes irrelevant after it comes into the country. So that helps to have a livelier spot market also because those companies that cannot buy from Russia, for example, they can't buy this blended diesel, it's Brazilian diesel after it comes into the country. That's what the prices that we are assessing. The second thing is how important it is that Petrobras, for the spot market to evolve, that Petrobras is no longer involved in distribution. They do import a lot of fuel still into Brazil, but in the end, if they were setting the prices lower as they did in the past by distributing them and selling at their own posted prices, the other competitors... Well, no one could compete, right? Jeff Mower: Yeah. Renato Rostas: If Petrobras is a state-owned company, they're backed by the government, by the treasuries. So the other companies, they're private companies, they cannot compete. Now, they can buy those imports and they can compete with Petrobras's own prices by basically going to the spot market and creating a competition. They can have their own prices. There's competition. And in the northeast specifically, Brazil is short in the northeast. Right? Jeff Mower: And I imagine too, when you move to a spot market or transparent spot market and away from the sort of posted prices, it also just gives you a better idea of where the disruptions are, right? I mean, I've never... How you determine, how do Petrobras determine before a spot market when a certain region was in need if those prices are not allowed to fluctuate, to reflect that sort of supply demand and balance? Renato Rostas: It was basically, it did follow in some capacity international trends or some kind of local fundamentals, but it was following loosely. Jeff Mower: Sure. Renato Rostas: And now, to be honest, after the new administration, they kind of stopped following import parity prices that closely. And they are, we see diesel prices, for example, and even gasoline, staying the same for a year, a year and a half. So that happens, but the spot market is created and the Petrobras do not participate in distribution anymore. And we are still importing a lot of competitive fuel from the US, from Russia. So at this point, it's basically, yes, the imports do compete with Petrobras, but there is a market there, so it has been created. Kauanna Navarro: I want to add, we all actually launched the first inland FC prices at the same time as we launched gasoline prices. These inland prices are not in northeast, they are in southeast and south, and they are in the main distribution hubs we do have in those locations in Paranaguá, near Paranaguá, Araucária, and Paulínia, which is near to Santos. Why these prices are important, why we decide to launch on these locations? Because the boards can serve both the central and south crops harvest, and also supply local transportation. And sometimes market participants from central west, for example, go to Paulínia or Araucária looking for products, could be from Petrobras, somebody selling their own coda or people bringing from the ports. And at times during the month, especially after the half of the month, we do see more other market participants just offering spot market over there and nobody had these prices before. So it's interesting because we bring more transparency to the market and also really show how the market's not on Petrobras hands anymore, not only. Even on their location, on they have the biggest refineries. We do see other market participants competing with Petrobras, and Petrobras can just sell in tenders and their own codas set by contracts. So if I need a more supply, I need to go to the spot market and we do see spot markets on those locations because of that. Jeff Mower: All right. Kauanna Navarro: We just launched it. Jeff Mower: Well, I'll leave it at that. It's been fascinating. It's been really fascinating to see how these markets are developing and to see your coverage. It's really great work, and I'm really looking forward to seeing more of it and seeing how it develops further. I think for our listeners, please go to Platts Connect for more on the Brazil refined products markets. So thank you, Kauanna, Isabela, and Renato for joining me. And thanks again to our listeners for tuning in to this episode of the Platts Oil Markets podcast. This Oil Markets episode was produced by Jennifer Pedrick in Houston.
