Argentina offers subsidy to oil companies, provinces after fuel price freeze

• To sustain the level of activity and employment and protect the consumer during this exceptional period, it is appropriate to mitigate the impact.
• US Gulf Coast cash crude grades surged on Monday after attacks on Saudi Arabian oil sites knocked out about 5% of global oil supplies.

BUENOS AIRES: Argentina will offer oil companies and oil-producing provinces a subsidy to compensate for a government imposed fuel price freeze, an official bulletin published on Monday showed.

The subsidy of 116.10 pesos, which was about $2.06 on Monday morning, will be applied to each barrel of oil delivered to the market in the month of September, the government said.

The government of Mauricio Macri said in August it would hold down fuel prices for 90 days to protect hard-hit consumers after the peso currency plunged sharply following his primary election defeat to opposition candidate Alberto Fernandez.

"To sustain the level of activity and employment and protect the consumer during this exceptional period, it is appropriate to mitigate the impact that the [fuel price freeze] generated in the oil producing companies as well as in the biofuel producing companies," the Energy Secretariat said in the bulletin.

Even with the subsidy, however, the price per barrel clocked in below the international price, especially after US Gulf Coast cash crude grades surged on Monday after attacks on Saudi Arabian oil sites knocked out about 5% of global oil supplies.

In late August, state-controlled oil giant YPF informed its suppliers they would be paying foreign currency-backed contracts at a set exchange rate of 45.19 pesos per US dollar, far below the market rate.

YPF said it faced an "unprecedented" challenge amid the government fuel price cap and a brewing financial crisis.