Argentina's state-owned oil company is looking to buy diesel on the spot market as demand for the fuel is at its highest level in 12 years.
YPF SA tendered 850,000 barrels of low-sulfur diesel for delivery in July and August, according to a document accessed by Bloomberg last week. For nearly three months, Argentina has been grappling with fuel rationing as demand recovers from the pandemic.
The request for additional diesel comes as the country's farmers need it most to harvest and transport crops. Globally, fuel supplies are tight in the wake of the Russian invasion of Ukraine.
Despite the need for more fuel, refiners are reluctant to ramp up because government controls on the price of crude make it less attractive to import the kind of oil they need to increase production, Felipe Perez, director of downstream at S&P Global Inc said in a telephone interview from Los Angeles.
The government monitors all domestic oil sales as an indirect tool to control fuel prices. Currently, domestic Medanito oil sells domestically for about US$65 a barrel. To import oil on global markets, refiners would pay more than US$100.
"Argentina is in trouble because refiners don't want to pay more for imported oil if they can pay much less for domestic oil," Perez said. "In addition, the government is pressuring fuel producers not to raise their prices, which keeps refinery margins in check."
Still, Argentine refineries raised oil processing in April to a four-year high of 81.4 percent of capacity. But that's a far cry from the peak of 86.4 percent seen in 2017, according to government data. Diesel demand reached the highest level in data going back to 2010.
To help boost supply, the government last week announced plans to temporarily increase biodiesel content in the diesel mix and force YPF to stop selling fuel to vehicles with foreign licence plates that cross the border to fill up at a lower price.
by Lucia Kassai, Bloomberg