Argentina Refiners Said to Begin Paying Market Price for Oil

Updated on
  • YPF paid producers about $62 per barrel before this week
  • Energy Ministry said to have told YPF to cut prices paid

Argentina’s state-run company YPF SA will start paying market prices for the oil it buys for its refineries, freeing up much needed cash for the government.

The Energy Ministry told YPF this week to buy crude at market prices instead of the current subsidized amount of about $62 per barrel, according to people familiar with the decision. YPF declined to comment in an e-mail and an Energy Ministry spokesman declined to comment by phone.

The price that YPF pays producers sets a benchmark in Argentina because it controls about 60 percent of the refining market. Argentina is home to Vaca Muerta, one of the world’s largest deposits of shale oil and gas.

The sudden move is concerning investors in Argentina’s oil sector, David Tawil, president of Maglan Capital, said in a message. “This type of middle-of-the-night radical switch in pricing is not good,” he said. Maglan Capital is a hedge fund in New York with Argentine energy investments.

Oil fell 0.8 percent to $45.04 a barrel at 10:48 a.m. in New York. YPF’s American depositary receipts dropped 0.5 percent to $15.93.

President Mauricio Macri has cut subsidies for everything from fuel to electricity as he seeks to narrow a fiscal deficit that was the widest in three decades last year. In January, he slashed the prices that oil producers get and pledged to continue lowering them until they were at market levels. His predecessor, Cristina Fernandez de Kirchner, had fixed prices for crude as high as $77 to promote drilling.

YPF reported its biggest loss since at least 1997 in the third quarter as it grapples with rising costs and reassesses the value of its assets amid the industry’s worst slump in a generation.

— With assistance by Carolina Millan

(Updates with comment from investor in fourth paragraph, oil price in fifth paragraph.)
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