OREANDA-NEWS. Crude import demand surged for Latin American countries in the second half of 2015 as production decreased and existing domestic volume was committed at higher rates to cash-for-oil debt repayment programs.

Spot crude purchases by Latin American companies averaged about 2.6mn bl per month in the second half of 2015 compared to only 550,000 bl per month in the first half.

Argentinian crude firms YPF and PanAmerican Energy scaled back exploration and production efforts by placing a combined 33 rigs on standby ahead of the expiry of subsidies that had kept the Argentinian domestic price of crude significantly above international levels.

Colombia's Ecopetrol meanwhile reported a 1.8pc yearly decline in production and a subsequent 11.6pc decline in crude exports. This was fueled by ongoing attacks on infrastructure by the rebel group, Farc, and commissioning of the new 165,000 b/d Reficar refinery, for which the company has already imported 950,000 bl of Nigerian oil.

Uruguayan Ancap and Caribbean PetroCaribe are further relying on the spot market to replace previously contracted imports that were provided for in now-expired supply agreements with Venezuelan state-owned PdV. The contracts had supplied PetroCaribe with the majority of its total crude needs in return for agriculture and about one-fifth of Uruguay's crude capacity.

The uptick in crude demand in Latin America is likely to continue through most of the first half of 2016 while global oil prices are low. US oil benchmark West Texas Intermediate (WTI) has averaged $45.42/bl since 1 July while widely used European benchmark Ice Brent averaged $49.47/bl in the same time frame, down from $85.79/bl and $90.36/bl respectively in the second half of 2014.

Ancap has no immediate plans to renew its contract with PdV because of a lack of confidence in the company's ability to guarantee fulfillment of the contract terms. PdV's outstanding cash-for-oil contracts with Chinese companies has tied up the majority of Venezuelan crude exports in the current low-price environment. PdV already purchased at least 4mn bl of west African crude for blending with its heavier grades.

Ecuadorean state-owned PetroEcuador, which has a similar agreement with Chinese firms, plans to import up to 30mn bl beginning in January for optimization of the Esmeraldas refinery. Mexico's state-owned Pemex has also been granted approval to begin importing up to 75,000 b/d, or around 30mn bl per year, of light US crude oil in exchange for heavy sour Maya.