3 Latin American Countries Particularly Smashed by Oil Collapse Due to COVID-19 Crisis
Traders say, the costs of significant Latin American crude grades plunged early this week after the crash in standard crude stocks, vexing a weak market that has already been weak, and has seen a small number of sales in April.
Relatively, crude stocks dived at 25 percent on Tuesday, their lowest level in almost 20 years, one day after frightened traders sent the U.S. West Texas Intermediate oil to less $40 a barrel due to an enormous supply surplus, as well as a 30-percent fall in demand because of the COVID-19 pandemic.
Meanwhile, as physical crude grades in the U.S. dropped into adverse terrain for the first time in history, Venezuelan, Mexican and Ecuadorean grades indexed to them, which included Mexico's Maya, traded negative too, for the first time.
Certain unpredictability has resulted in traders backing away in recent weeks, successfully closing trading in primary regional grades. Also, Latin America is exporting some five million barrels each day, generally for heavy crude, with the biggest consumers in the U.S. Gulf Coast.
Mostly, about 50 percent of the sales are through long-term contracts for supply, while the other 50 percent is through "spot trades on the open market."
Heavy Grades Suited for Refining into Diesel
The substantial grades are appropriate for refining into diesel, and this saw a higher consumption compared to gasoline early in the COVID-19 crisis since trucking deliveries were nonstop even as the buyers or consumers have temporarily stopped driving.
Nevertheless, inventories of diesel have been increasing in figures lately in the U.S. as there has been a constant drop in demand. Specifically, the oil export basket of Mexico, including Maya heavy crude, as well as the other grades which are exportable, reportedly "closed at $2.37 a barrel" on Monday.
In connection to this, Maya crude sent to the "U.S. Gulf Coast is indexed to WTI, which is delivered to Houston." Also, a lot of crude traders are currently wondering how the payments would be negotiated should a contract ends up with a negative sale amount.
This means that the supplier needs to pay the buyer for the oil to be taken. Comparatively, a trader recently said that a lot of sellers had embraced clauses that state the costs paid cannot be below 10 cents a barrel.
Venezuela and Ecuador's Flagship Crudes
Venezuela's flagship Merey crude's spot sales, which, following reformation is presently indexed to US Mars crude, Middle Eastern and Brent grades, are being sold at only from $1 to $2 following trans-shipping charges off Malaysia, the company's most active spot to do re-selling, according to traders.
Meanwhile, the Napo heavy crude of Ecuador for delivery in June was trading at $6 a barrel on Tuesday, below WTI, while the medium crude, Oriente, traded at roughly $4 a barrel below WTI. This means the final spot prices were from $6 to $9 a barrel. Both grades are reportedly indexed to the U.S. West Tax Intermediate stocks.
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