RIO DE JANEIRO, BRAZIL – The war between Russia and Ukraine has changed the dynamics of the international fuel market. The shortage of supply has thrown small importers in Brazil off track, and large companies are also feeling the decline in product supply, especially in the diesel oil segment.
The scenario reflects Europe’s desire to stockpile to avoid power outages in the event of more gas purchases from Russia, as diesel can be a substitute for gas. Most of these stocks are bought in the United States.
To bring diesel to Brazil today, the importer has to pay a high price, and it has happened that he could not even find the product, said Nelson Ostanello, president of Green energy in Brazil, the largest British fuel distributor with a branch in Brazil.
“Europe gets diesel from all over the world. More than 50% of the diesel consumed in Europe comes from Russia, we have a very serious diesel supply problem right now,” Ostanello said to the Estado newspaper.
Most of the diesel fuel imported by Brazil comes from the Gulf of Mexico, from where the fuel is shipped to Europe due to the war and a high premium is charged for it.
Ostanello said diesel was offered at a discount about 15 days ago, but with the war, the industry has begun to charge a US$0.30 premium over the price. “The gallon of diesel that used to cost US$3.20 now costs between US$3.50 and US$3.60,” the executive said.
For Brazil, the news is even worse considering that the sugarcane harvest, which moves billions of gallons of diesel each year, begins in late March and continues into April.
Despite recent government announcements of diesel incentives, such as federal tax exemptions and changes to the ICMS, the price is likely to remain high for Brazilian truckers, who are already heading for a possible strike, as happened in 2018.
“In my opinion, the import situation will continue to deteriorate. Brazil has to import 25% of its needs, and Petrobras has driven the price down so much in the recent past that no one has had the courage to import diesel from outside, not even Petrobras itself,” Ostanello said, pointing out that the price of diesel reached R$2.50 before the increase announced by the state-owned company on Nov. 11, which prevented stocks from building up.
SHORTAGE
According to sources, even the country’s major importers are having difficulty importing diesel because the low supply could jeopardize supply. Despite the high price, the number of offers has plummeted each time the fuel was announced for purchase.
Normally, when diesel was ordered, an offer of more than 20 vessels appeared, but now there are at most two or three, explained a major importer.
According to Pedro Shinzato, risk management specialist at consulting firm Stonex, diesel inventories in the U.S. are near historic lows, and the situation in Europe could be worse, although there are no open statistics like in the U.S. market.
“The big problem is that Russia is a big diesel supplier to Europe, and European trading companies are now reducing imports of Russian products and increasing imports of American products,” the analyst explained.
The president of the Brazilian Association of Fuel Importers (Abicom), Sérgio Araújo, also said that while the price of oil on the international market is falling, the price of diesel is not.
As a representative of medium and small fuel importers, he sees the import window completely closed at the moment. “I talk to our agents and they say that it is not easy to negotiate diesel oil for Brazil, it is expensive and the market is not easy, it is very limited.
The difference between diesel prices sold by Petrobras at its Brazilian refineries and prices on the international market fell from 24% on March 10 to 4% on March 11, after the state-owned company announced an increase last Thursday. With the deterioration of diesel supply in the foreign market, the gap widened again and was already 7% last Monday (14).
The information comes from the newspaper O Estado de S. Paulo