Brazil continues to import Russian refined products while decreasing imports from the US, market data and sources indicate, pushing the price of diesel in Brazil lower.
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Register NowThe US and European countries have curbed imports of Russian products since the country invaded neighboring Ukraine in early 2022. Sanctions levied in early 2023 by the G7 and EU put in place a price cap on refined products of $100/b. Latin American countries, including Brazil, have instituted no such price caps or sanctions.
The strong influx of Russian barrels has affected the local refined products market in Brazil, as smaller market players in Brazil have been purchasing discounted Russian barrels.
"It is hard to know because those who buy are smaller companies that were recently created," one market source said. "It is still really blurry."
Sources have now indicated that larger market players, including at least one major Brazilian fuel company, also have begun buying discounted Russian barrels.
"Only Petrobras is trading US Gulf Coast," another market source said. "Other players are touching Russian."
Kpler shipping data shows Russian diesel exports to Brazil totaling 1.92 million barrels so far in July, while the USGC has exported 1.09 million barrels to Brazil in July. This is a large decrease of exports from the USGC. In July 2022 exports from the USGC totaled 10.29 million barrels of clean product, while Russia exported 750,000 barrels to Brazil in the same month.
Francisco Monaldi, director of the Latin American Energy Program at Rice University, told S&P Global Commodity Insights that a large volume of Russian refined products is flowing to Latin America as he believes the US lacks the political will to sanction countries that continue to buy the barrels.
The US could more aggressively work to halt the flow of refined products, he added, just as it has done it regarding Venezuela and Iran's oil production. However, US officials are hesitant to do so because Russia's large presence in the market means harsher sanctions could cause a price spike, Monaldi said.
Since early 2023, the price of Russian diesel has consistently been reported at a discount of 20 cents/gal compared with non-Russian product, market sources have said.
Some market sources have heard even sharper discounts.
"In some cases, we have heard a discount up to $80/b," one market source said.
Other market sources have cast doubt on discounts for Russian products at that level.
Another market source said that "$80/b is almost free. It seems very aggressive."
Another market source said he had been seeing offers at USGC ULSD pipe plus 2.50 cents/gal for exports to Brazil.