Prices for imported 10ppm (S10) diesel in Brazilian ports recently surpassed contract prices for biodiesel for the first time since October 2023 due to a rise in global oil derivate prices caused by the war in Iran.
Prices for S10 diesel imported at the southern port of Paranagua, in Parana state, delivered at Araucaria terminal, reached R5,173/m³ (339¢/USG) on 6 March. That is above the average price of biodiesel contracts in the Parana-Santa Catarina states hub of R4,656/m³, delivered on the same basis and date.
The last time the fossil fuel prices exceeded biodiesel prices was in August-October 2023, when the country faced a supply bottleneck and Russia temporarily banned diesel and gasoline exports. At the time, S10 diesel prices reached R5,015/m³, while biodiesel was trading at R4,316/m³ on the same basis.
The recent price reversal reinforces the biodiesel sector's lobbying for increasing the biodiesel blending mandate, arguing it would alleviate inflationary pressures.
Brazil's fuels of the future law projected an increase in the blending mandate to 16pc from the current 15pc this month. But a new schedule from the mines and energy ministry calls for the completion of the first phase of technical feasibility tests between August 2026-January 2027.
S10 diesel prices rose by 45pc from the 28 February start of the war to 10 March, according to the Argus indicator. That tracks increases in heating oil futures contract traded at Nymex.
For now, distributors and importers do not see an interruption in domestic diesel supply, despite the uncertain environment in the international market. Current stock levels and those forecast to arrive in Brazil are sufficient to meet domestic market demand until the first half of April, one trader told Argus.
Hydrocarbons regulator ANP also sees fuel activities and supply normalized up to now, it told Argus.
Brazil imported 2.7bn liters (288,000 b/d) of diesel in January-February, up by almost 17pc from the same two-month period last year, according to trade ministry data. Around 1.5bn liters of diesel is expected to arrive in the country in March, according to data from oil analytics firm Vortexa.
Pricing difficulties
Market participants are struggling to obtain firm offers for diesel imported because of fluctuations in maritime freight rates and increased demand for fuel in the international market.
The interruption of fuel exports from the Persian Gulf has increased demand for US products, mainly for delivery to countries in Europe, Central America and South America.
An increase in freight costs has impacted offers presented by US diesel suppliers and also boosted differentials presented by Russian exporters.
The Argus indicator for Russian diesel for delivery to the northeastern port of Itaqui, in Maranhao state, on a dap Brazil basis reached a discount of 11.5¢/USG from Nymex contract with May settlement. Offers from other origins other than Russia were at discounts of 3.5¢/USG on the same basis.
