Paraguay's fuel market is showing a widening disconnect between falling international prices and slower domestic pass-through, as state-owned Petropar remains constrained by high-cost inventories accumulated during the recent price spike.
Global crude and refined product benchmarks have declined sharply in recent weeks, driven by easing geopolitical tensions and renewed US-Iran negotiations. US benchmark WTI crude futures are down 17pc since 1 June, while the Nymex ULSD July contract fell 14pc during the same period. Nymex RBOB had a softer drop of 3pc.
The correction has lowered import parity for diesel and gasoline shipping into Paraguay, theoretically opening space for retail price reductions. But pump prices have yet to adjust, reflecting differences in procurement cycles and stock positions across market participants.
During the price rally, private distributors moved quickly to raise pump prices in line with higher import costs, only 10 days after the US attacked Iran in late February. Petropar, by contrast, absorbed part of the increase, leveraging its larger storage position to delay and smooth domestic adjustments. Its 320,000m³ tankage capacity enabled it to act counter-cyclically, reinforcing its role as a price stabiliser and supporting a gain in market share. Petropar raised its prices for the first time almost a month after the conflict started.
That advantage is now acting as a constraint. Petropar secured significant volumes at elevated premiums during April-May, at the peak of the rally. In mid-April, it awarded a 50,000m³ (316,500 bl)diesel tender to Vitol at a 53.3¢/USG premium to the Argus ULSD Colonial Pipeline 62 benchmark, for delivery FOB Km 171, Campana or Zarate. In May, Petropar purchased a further 40,000m³ from Trafigura at a 37.11¢/USG premium and 40,000m³ from Glencore at a 32¢/USG premium.
But last week, Argus assessed diesel premiums at 14.50¢/USG over July Nymex ULSD for prompt delivery at Km 171 and at 11.50¢/USG over August Nymex ULSD. This would translate to premiums of approximately 21.25¢/USG and 18.25¢/USG, respectively, over Argus ULSD benchmark, about 33pc lower than the lowest premium Petropar obtained in recent purchases.
These higher-cost barrels continue to weigh on Petropar's average supply cost, limiting its ability to pass through lower import parity without eroding margins. The result is a lag in domestic price adjustments, particularly within Petropar's retail network.
Private importers, with smaller inventories and shorter turnover cycles, are better positioned to capture the downtrend. Faster sourcing of cheaper cargoes gives them greater flexibility to adjust prices, although competitive dynamics and Petropar's dominant role are likely to cap aggressive undercutting.
While current international benchmarks indicate scope for reductions in fuel prices, pass-through in Paraguay is likely to remain gradual in the near term.