Brazil’s diesel market has been under pressure as higher diesel availability has led to price reductions at the country’s main ports during the last quarter of 2024. As of December 2, S&P Global’s Platts assessed the price for ultra-low sulfur diesel (ULSD) at Santos port at Real 3,502.60 per cubic meter, marking a discount of Real 30 compared to Petrobras’ reference price in Paulínia. This price is also Real 70 lower than the start of October. In the same period, NYMEX ULSD futures have dropped by 4.4%, reflecting the broader trend in the market.
Platts began tracking diesel prices on an FCA (Free Carrier) basis for the Brazilian market in December, following its entry into the market in October. Since then, a slowdown in liquidity has been observed, driven by a reduction in agricultural activity at Brazil’s four major ports. Despite this, diesel imports into Brazil are set to rise by 13% in 2024, according to preliminary data from S&P Global Commodities at Sea, reaching approximately 9.6 million metric tons.
Domestic production of diesel is also on the rise. Petrobras, Brazil’s state-run oil giant, reported in its third-quarter operational results that diesel production and imports outpaced sales from July to September. Petrobras produced 708,000 barrels per day (b/d) of diesel and imported 68,000 b/d during the period, while sales reached 723,000 b/d. The increased supply, combined with the high cost of biodiesel, has contributed to a growing inventory of diesel, with stockpiles increasing by roughly five days since August.
Despite these rising inventories, some importers have reduced purchases in recent months to curb the availability of diesel in the market. This trend, along with the high levels of imports in September and October, has kept stocks elevated.
Petrobras’ increased production is another factor contributing to the slowdown in diesel imports. Data from Brazil’s National Petroleum Agency (ANP) showed that the country’s refineries ramped up diesel output in October, driven by strong demand from the agricultural sector during the peak harvest seasons for oilseeds and sugarcane.
Diesel liquidity varies across Brazil’s ports. The Santos and Paranaguá ports in the Southeast and South are seeing higher liquidity, while the Northeast ports of Itaqui and Suape are experiencing much lower activity. Over the past eight years, diesel demand in Brazil has increased by 1-3% annually, with diesel sales up 3.67% in the first ten months of 2024 compared to the same period in 2023.
In terms of imports, Brazil is reducing its reliance on U.S. diesel. October 2024 saw Brazilian imports of U.S. diesel drop to just 55,000 b/d, down from 155,000 b/d in 2022. In contrast, Russian diesel maintained its lead in Brazilian imports, accounting for 2.9 million barrels in November, compared to 2.5 million barrels from the U.S. However, competition from U.S. barrels and subdued demand have constrained Russian exports to Brazil, with deliveries to the country falling to their lowest rate of the year in late November.
The Brazilian Association of Fuel Importers (Abicom) noted that refined fuel imports are vital to meet domestic demand, given Brazil’s structural deficit in refining capacity. Looking ahead, the association expects Russia to continue as a key exporter to Brazil in 2025.
Analysts predict that potential refinery imbalances in the U.S. and Europe, along with increased production from Nigeria’s Dangote refinery, could lead to oversupply in the Atlantic Basin’s refined fuel market. This could affect Brazil’s domestic diesel prices, especially as Brazil does not align its prices with import parity levels. The competitiveness of Brazilian diesel will depend on the supply-demand balance in Europe and the U.S., as well as the availability of foreign imports.
Petrobras, which controls around 75% of Brazil’s fuel sales, plays a major role in setting diesel prices in the country. FCA transactions are influenced by Petrobras’ refinery prices, which serve as the benchmark in most ports, except in Aratu, where Acelen’s posted prices are used. Recently, Petrobras awarded a tender for 100,000 cubic meters of ULSD for December delivery, signaling active demand in the market.
Despite the ongoing pressure on prices, Petrobras has not altered its diesel pricing since December 2023, and no changes are expected in the near future. As of late November, distributors Ipiranga, Raízen, and Vibra control about 55.7% of the domestic diesel market share, according to ANP data.
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