March 28, 2023 [Reuters] – The U.S. oil refining industry expects to maintain a competitive advantage exporting fuel to Latin America even though Brazil has started to import more Russian diesel, according to an official at a top U.S. refining lobby.
Latin America accounted for about 35% of U.S. refined product exports last year, according to the U.S. Energy Information Administration. Russia has said it plans to increase refined product exports to the region, which has not joined other Western countries in sanctions designed to punish Moscow for the war in Ukraine.
“I’m not sure the quality of the product coming out of Russia…is going to be of the quality that a lot of Latin American countries are looking for,” said Susan Grissom, chief industry analyst for AFPM, in an interview at the American Fuel & Petrochemical Manufacturers annual meeting in San Antonio, Texas.
Latin American buyers would have to pay increased costs for Russian fuel because it is shipped from farther away, she said. Unfinished products and vacuum gasoil exported from Russia are more likely to be shipped to refining centers that still take Russian products, like the Middle East and Malaysia, Grissom added.
U.S. distillate fuel oil exports in 2022 averaged about 1.3 million barrels per day, which was below pre-pandemic levels, according to EIA data, with most distillate fuel oil exports sent to Latin America.
Russia exported a record among of diesel to Brazil in February, according to traders and Refinitiv Eikon data.
“I’m sure there are great efforts being undertaken to figure out a way around the product sanctions,” said Joe McMonigle, Secretary General of the International Energy Forum (IEF), in an interview. “It’s safe to say there will be global consequences to these sanctions,” he added.
Russia will have shipped about 3 million barrels of clean refined products to Central and South America in March, compared with 1.3 million a year ago, according to the Refinitiv data.
The United States is planning to ship about 13.5 million barrels of clean fuel products to those regions this March, the data showed.
U.S. overall distillate exports remain relatively flat year-on-year, according to EIA data.
Meanwhile, overall Russian fuel exports fell to 2021 levels last year, but with lower revenues.
According to the International Energy Agency (IEA), Russia’s total exports of oil and petroleum products last month fell by 200,000 bpd from last year to 7.5 million barrels per day (bpd). However, Russia’s revenues from the sales in February were only $11.6 billion compared with $14.9 billion in 2021, when it also exported 7.5 million bpd of oil and petroleum products.