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Latin American US refined products imports fall to pandemic lows

Latin America is the least dependent on US refined products since the start of the pandemic, thanks to a general slack in demand, Russian diesel shoving US-origin barrels out of Brazil, and refinery upgrades reducing import needs in Chile, Colombia and Peru.

“The LatAm world is pulling less from the Gulf Coast as their systems are running OK and demand is slightly off,” one regional products trader said June 3.

Latin America and the Caribbean imported 77.6 million barrels of US refined products in March, down 2% on the month, 18% on the year and the lowest volume since April 2023, according to US Energy Information Administration data released May 31. But the US exported 198 million barrels to all countries in March, the third-highest amount thanks to increasing NGL exports like propane and butane to Asia.

Latin America’s percentage of US exports slipped four points to 39%, its lowest since 38% in May 2020 and then dating back to recession months in 2008 and 2009. Latin America routinely pulled in half of all US products before Russia’s invasion of Ukraine, including a record 99.4 million barrels in August 2022. Russian diesel has nearly completely displaced US barrels for Brazil’s import needs, with only 138,000 barrels – half a cargo – from the US in March, the first time since 2015 that no full US cargoes arrived.

Brazil has a continual healthy need for diesel cargoes, but reverting it back to the US would add just three percentage points back to the US-origin volume for Latin America.

“The only country that is importing mainly gasoil from Russia is Brazil,” a second market source said. “All the others are importing from the USA.”

Or from Asia, as is more often the case these days on the Pacific side from Mexico down to Chile. Mexico mainly attracts gasoline on its western coast, and Pemex trading arm PMI is said to have pulled seven cargoes of gasoline from Asia in the last two weeks. Chile and other countries tend to import more diesel, but have struggled over the last year due to Panama Canal draft restrictions that have increased transport time and money from the USGC.

Increased gasoline, naphtha cargoes to Brazil
“I am hoping to see more USGC barrels crossing the canal now that the draft situation is normalizing,” a third source said. “That put some pressure on crossing, thus increasing interest on Canadian, US West Coast and Far East barrels into Chile, Peru, Ecuador. The other side — Brazil, Uruguay, Paraguay and Argentina — is still a question mark, although we see local refining taking a bit of the pie that used to be open.”

A fourth trader echoed the statement, seeing a shift to the western side of Latin America attracting more imports than the eastern side. “Overall, the biggest change has been ex-US into Mexico so far,” he added.

Mexico led all countries in US products imports with 35.8 million barrels, up 11% from February but down 19% from March 2023 imports. Brazil typically follows in the No. 2 spot, but dropped to No. 5 with 3.27 million barrels, declining 41% on the month and 38% on the year and hitting its lowest level since October 2015. Naphtha and petroleum coke made up the bulk of Brazil’s US product imports.

S&P Global Commodities at Sea data indicates the situation has changed little in subsequent months, with between 20 and 30 cargoes from Russia and just three US cargoes possibly arriving into a Brazil landscape seeing less demand amid overproduction in May. Platts, part of S&P Global Commodity Insights, started assessing an all-origin DAP cargo assessment into South Brazil on Sept. 1. It remained over $100/b for nearly all its history until mid-April, hovering since then around the May 31 close of $97.2/b.

Sources said Russia is also sending an increasing number of gasoline or naphtha cargoes to Brazil.

Dos Bocas delayed opening
Chile jumped into the second spot for US products imports in March, increasing imports 15% on the month to 6.12 million, but 27% below year-ago levels before it had completed extended planned work at two refineries. Guatemala was third with 3.45 million in US imports, roughly the same as the previous month but down 30% from last year. Panama, a storage hub, was fourth at 3.39 million, up 9% on the month and down 24% on the year.

Peru was sixth with 2.86 million barrels, down 3% on the month and 13% on the year. In December 2023, Peru brought fully online the delayed $5.3 billion expansion of its 95,000 b/d Talara oil refinery. Ecuador was seventh among importers at 2.66 million barrels, the Dominican Republic eighth at 2.57 million barrels, Honduras ninth at 2.47 million barrels and Colombia 10th at 2.3 million barrels.

Refinery throughputs in Chile, Peru and Colombia were said to have increased by double digits due to refinery improvements. Colombia is the rare South American country able to export ULSD and jet fuel on a regular basis.

Mexico has steadied in imports, but observers are awaiting an oft-delayed opening of Mexico’s new Dos Bocas refinery at the port of Olmeca. S&P Global analysts estimate that production could begin at the end of 2024, possibly reducing Mexico’s net imports by about 100,000 b/d for gasoline and diesel.

Even without Olmeca, Pemex reached over 1 million b/d in March, levels not seen since 2016, S&P Global analysts said in its Latin America Short-Term Outlook for refined products released May 31.

“The ramp up of Olmeca combined with the startup of Nigeria’s Dangote refinery and a structural deceleration of demand growth, will flip the Atlantic Basin from a structural deficit to surplus,” the analysts said. “The region remains a growth demand market, although not as much as in the last decades.”
Source: Platts

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