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Argentina unveils two large product tenders, but price worries persist in Latin America

Argentina’s Cammesa unveiled another round of multi-cargo tenders for high sulfur diesel and fuel oil March 25, although half the size of the last one as diesel prices hovered near record highs.

The wholesale power administrator asked in separate tenders to buy seven cargoes of fuel oil and five cargoes of HSD, with bids due March 30 for delivery May 16 through June 5, sources said. The fuel oil tender was the same size as a Feb. 7 award to Mercuria for six cargoes and to Novum for one, but the HSD one was much less than the 18 HSD cargoes awarded at the same time to six entities.

Platts assessments for delivered ULSD CIF Argentina cargoes dropped to $163.57/b March 25 after hitting $170.41/b two days earlier, the second-highest price since $189.31/b March 8, according to S&P Global Commodity Insights. On Feb. 7, Platts assessed it at $116.78/b. Constrained supplies of diesel and the freight to move it has led to the record global rise in prices since Russia’s invasion of Ukraine.

It’s the highest-priced major refined product, but it’s the coveted part of the barrel and no more so than in Latin America as countries stock up for winter demand, one market source said. “Diesel seems to be very tight in the market,” the market source said.

Mid week, Petroecuador broke a month-long dry spell for big Latin American tenders, awarding 1.96 million barrels of 50 ppm premium diesel in seven cargoes to Glencore.

The state oil company is paying a $7.45/b premium to Platts benchmark USGC ULSD pipeline, compared to slight discounts for previous tenders. Refined product prices in Latin America, especially for ULSD, have risen back near March 8 records as the Russian invasion continues and Europe seeks new supply sources from the refinery-rich US Gulf Coast and elsewhere.

“It’s a crazy week,” a second source said. “The FOB ULSD premium is going sky high. It’s going to be tough for LatAm to compete with European demand.”

Government entities have canceled, shrunk or delayed tenders, opting more often for spot cargo buying that attracts less attention and is less likely to spike the differentials, sources said.

Several larger ones were awarded or unveiled this week, including a Refidomsa purchase of HSD in the Dominican Republic and an Ecopetrol purchase of two cargoes of 300,000 barrels from Valero, sources said. Copec in Chile is also said to be active in the market for ULSD, and had bought 23 cargoes of 300,000 barrels each for May-August delivery at this time last year.

Petroperu also has an 11-cargo diesel/biodiesel award that had been expected to be out mid week. Sources said they may not have received enough offers to fill the entire award.

“They are all trying to reduce imports,” the second source said.

Governments also are trying to curb high pump prices for customers through subsidies and other relief. Mexico has discounted or waived a special import tax known as IEPS, while Brazil has just reduced its AFRMM import tax from 25% of freight to 8%.

Latin American countries are very worried about the effect of oil prices on their economies, a third source said.

“I hope we don’t start getting demand destruction,” the third source added.
Source: Platts

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