Matthew Kohlman, Platts

HOUSTON
EnergiesNet.com 06 17 2022

US Gulf Coast ULSD exports to the region ranging from Mexico to Argentina are once again in full swing, helping push Gulf Coast assessments and Latin America import parity prices to record levels June 16.

Platts assessments for USGC ultra low sulfur diesel pipeline rose 2.39 cents/gal to $4.5509/gal, or $191.14/b, on June 16, breaking for a second straight day the previous record of $4.4974/gal on May 2. The Gulf Coast ULSD benchmark first popped past its mid-2008 record on March 8, when it hit $4.4813/gal after the Russian invasion of Ukraine. This is the third price spike wave sinceMarch 8, but prices have generally remained higher since then than any other time since 2008.

Already considered the factory floor for the world’s refined products, the Gulf Coast doubled down on that image as it tried to replace supply lost from Russia to most markets.

US diesel exports surged 15% week on week to 1.38 million b/d during the week ended June 10, according to data released by the US Energy Information Administration June 15. Sources said a lot of that demand was coming from Latin America, where subsidized pump prices have largely negated any demand destruction otherwise expected to occur..

Platts’ import parity prices for Peru rose $4.71/b to $195.63/b for ULSD June 16, breaking the May 4 record of $192.95/b, which itself was a peak of a run that beat the previous record of $177.68/b March 8. Colombia IPP prices rose $4.57/b to a record $188.11/b, while Brazil IPPs for ULSD rose $6.30/b to 197.76/b in Santos and jumped $6.30/b to $203.94/b in Betim, the record for the Brazil IPPs.

“Everybody is concerned,” said Felipe Perez, Latin America downstream strategist for S&P Global Commodity Insights. “I don’t see a physical shortage yet … But demand hasn’t dropped.”

He noted several events that could make the situation even worse for the Americas, such as a European ban on Russian diesel, a US export ban on refined products “and hurricane season in the United States. Then it could be a mess.”

Latin America has developed several coping methods for the high prices and volatility in the waves of diesel price spikes, including canceling tenders, reducing cargo volumes in tenders, asking for quicker delivery and paying premiums.

But the latest tender for Petroperu showed some signs of relief, as the state-oil company lengthened its delivery time and received more competitive offers than in recent months. Petroperu received offers for a five-cargo ULSD purchase tender June 16 from Trafigura at an 82 cents/b premium, followed by BB Energy at a $4.49/b premium and Glencore at a $4.85/b premium, sources said. One source said the top offer came in lower than previous buy tenders, but “there is a big difference between Trafigura and the other offers.” There was no initial award made for the cargoes’ delivery from mid-July to mid-August, twice as long a lead time as usual.

At the end of May, Petroperu bought one ULSD cargo from BB Energy at a $3.60/b premium to its formula for June 17-21 delivery and was heard to have awarded two more ULSD cargoes to BB Energy and Chevron for around a $7/b premium. Petroperu awarded Valero four cargoes of ULSD at an $8.80/b premium in a tender April 1, which included four other ULSD cargoes that were not awarded because of lack of offers or high prices, according to sources.

A shipping source said cargo loadings, especially for diesel, have picked up “without a doubt” from the US Gulf Coast lately, as has happened before and during past price spikes, although this time Europe is not a big demand destination.

“It’s another busy day on USG cargoes,” he said June 16. “The June 23-25 fixing window is busy to LatAm and Mexico. We’re missing the trans-Atlantic cargoes, though. I saw two TA cargoes; everything else is going south.”

spglobal.com 06 17 2022