Americas' Diesel Prices Diverge: US Drops with Lower Oil Costs, South America Shifts Imports

Texas (USA): During the week of May 31st, Diesel prices in North and South America reflected significant regional dynamics and market influences. In North America, particularly the United States, Diesel prices continued their declining trend, while in South America, various factors including Russian imports and refinery upgrades played crucial roles in shaping the market.

As of June 3rd, the average Diesel price in the United States was USD 3.726 per gallon, continuing its downward trajectory from the previous week. This decline aligns with a broader trend observed since early April, coinciding with a 9.56% drop in Brent crude oil prices, which closed at USD 78.22 per barrel on June 3rd. This trend in crude oil prices has had a direct impact on Diesel prices, as crude oil is a primary feedstock for Diesel production.

In contrast, South America's Diesel market experienced notable shifts due to changes in import patterns and domestic production capabilities. Latin America's imports of US refined products fell to 39% of total US exports in March, the second-lowest percentage in 15 years. The region imported 77.6 million barrels of US refined products in March, a 2% decrease from the previous month and an 18% decline year-over-year, marking the lowest volume since April 2023.

This reduction in dependency on US Diesel was primarily driven by Brazil's increased reliance on Russian Diesel. In March 2024, Brazil imported only 138,000 barrels of Diesel from the US, marking the first time since 2015 that no full US cargoes arrived. This shift significantly impacted the overall import statistics, as Brazil has a substantial demand for Diesel. Despite the potential to revert imports back to the US, it would only marginally increase US-origin volumes by three percentage points for Latin America.

Petrobras, the Brazilian state-controlled oil company, played a pivotal role in shaping the local fuel market. On June 1st, Petrobras announced a 7.6% reduction in jet fuel (QAV) prices, marking the first price change under new CEO Magda Chambriard. However, Petrobras had not adjusted Diesel prices since late 2023, maintaining Diesel prices close to international levels at Real 0.017 above the import parity price (PPI), equivalent to 0.5%.

Looking ahead, the outlook for Diesel prices in both regions will likely depend on several factors. In North America, continued fluctuations in crude oil prices and potential changes in refinery outputs will be critical. In South America, the ability of countries to manage logistical challenges and balance imports from various sources will play a significant role. Additionally, Petrobras’s pricing strategies and market interventions will remain a focal point for Brazil, influencing not just local prices but also broader regional trends.

Overall, the Diesel markets in both North and South America are poised for continued volatility, driven by a mix of global market forces and regional developments. Stakeholders, including policymakers, businesses, and consumers, will need to navigate these complexities carefully to optimize outcomes and maintain market stability.