Industry Trend Analysis - Subsidy Removal Will Direct Investment Upstream - DEC 2017

BMI View: The start of market-based pricing for crude and refined fuels in Argentina will increase transparency and investor confidence upstream. Crude production will therefore begin to recover in 2018 as benchmark prices modestly rise.

The end of fixed prices for Argentine crude and fuels marks yet another indication that the sector is shifting toward a more business-friendly system. As of October 1, the country suspended its plan to gradually align national prices with international benchmarks, thereby implementing a market-based pricing regime for crude and refined products.

This was triggered by an appreciation in Brent which rose above the regulated price of Argentina's Medanito crude of USD54.0/bbl for 10 consecutive days. Should Brent fall back below USD54.0/bbl for another 10 days before the end of the year, the plan would be reactivated, but only until January 1, when market-based prices will be fully implemented.

Primary Shortfall Poised To Narrow
Argentina - Fiscal Accounts
f = BMI forecast. Source: Ministerio de Hacienda, BMI

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