Market Talks: Russian diesel entrenched among importers

Brazil’s largest diesel importers are including acquisitions from Russia in their business plans over increasing competition in the domestic market.

Join Camila Dias, Argus Brazil Country Manager, and Gabrielle Moreira, Senior Reporter for Argus Brazil Motor Fuels, as they talk about the new phase of the import flow and reactions from the US and neighboring countries regarding the current import flow. 

Transcript

Hello and welcome to Market Talks. A series of podcasts brought to you by Argus about the main events impacting the commodities and energy sectors in Brazil and around the world. My name is Camila Dias, I’m Argus Brazil country manager and in today’s episode I will talk to Gabrielle Moreira, reporter of Brazil Motor Fuels publication, about the flow of Russian diesel in the Brazilian market.

Gabrielle Moreira: Thank you, Camila. Very glad to be here.

CD: Gabrielle, Russian diesel imports are currently a reality in the Brazilian market. Can we say that this ia long term trend?

GM: Camila, it is hard to say if this is a long-term trend. Considering the current macroeconomic and geopolitical situations, this flow should not change so quickly. Not only because of lower prices from Russia, but because we are seeing Brazil’s largest importers trying to find ways to buy from Russia, something that wasn’t happening earlier in 2023.

CD: But Brazil’s largest importers are already buying diesel from Russia?

GM: We haven’t had any cargoes from Russia reported to Argus yet. Among traders, the perception was that acquisitions by large companies would be a matter of time.

Earlier this month, the arrival of the vessel named Bruno in the southern port of Paranagua marked a new phase of the competition for the nationalized diesel market, once this cargo origin was Russia. To remind our audience, nationalized diesel is the custom cleared product stored in the Brazilian territory. Vibra, Raizen and Ipiranga are Brazil’s largest importers and fuel retailers. We recently contacted their press offices to talk about Russian imports. Ipiranga said it acts in accordance with current regulations and legislation and does not comment on supply strategies. Raizen declined to comment on the matter. Vibra did not respond to questions.

CD: The volume of Russian diesel imports surpassed the US in April, correct?

GM: Yes. Brazil imported almost 1 million cubic meters in April, and fifty-six per cent of the total volume came from Russia, according to data from the country’s trade ministry. The US, which historically has been Brazil’s main supplier accounted for 21pc And it doesn’t seem that May will be much different. Data collected until the end of May shows that 56pc of 1 million cubic meters discharged in Brasil this month came from Russia, according to oil analytics firm Vortexa.

CD: Is Brazil demanding all these volumes coming from Russia?

GM: Small and medium-sized retailers show greater interest in Russian diesel and these companies usually operates regionally rather than nationwide.

We also heard that part of the Russian diesel that comes to Brazil is redirected to neighboring countries such as Paraguay and Bolivia. No acquisitions from these countries have yet been reported to Argus. Also we are tracking vessels originated in Russia initially destined to Argentina, Uruguay and Chile having its route changed to Brazil.

CD: How are refiners from other countries reacting?

GM: USGC refiners have shown interest in the Brazilian market competition but beating Russian diesel prices doesn’t seem an easy task. Our sources say that offers from Russia are hovering around twenty and thirty cents per gallon below Nymex futures, on a dap Brazil basis, while discounts from the Gulf have not reached 10 cents per gallon this month. Those who can, buy from Russia. And those who cannot are studying ways to import from Russia. It is important to remember that Brazil has no import restrictions from Russia. Compliance rules forbids some companies to do business with Russia because of sanctions applied by G7 member countries and the European Union.

CD: With all this diesel volumes coming from Russia at lower prices, what impact can we expect in fuel prices in the domestic market?

GM: This is kind of a million-dollar question, Camila. Petrobras changed its pricing policy for oil products, moving its previous international parity pricing approach for a cost-based focus. It is not clear for us which price formula the company is using, and some market participants complained about the lack of clarity of Petrobras’ announcement.

Increased flows of Russian diesel into Brazil shows retailers moving away from buying from Petrobras, a trend that could take on new dimensions as larger importers start receiving shipments from Russia. Unfortunately, it is hard for us to measure this impact now. Maybe, at some point, the Argus team will have access to this information. This policy change might be a message for fuel retailers to keep buying the current volumes. We will keep an eye on it.

CD: Thanks for joining us again, Gabrielle.

This and other episodes of our podcasts are available on the Argus website, at www.argusmedia.com. Visit the page to follow the events that affect the global commodity markets and understand the developments in Brazil and Latin America. We’ll be back soon with another edition of “Market Talks”. See you soon!