Crude Oil Trade: Brazilian liftings remain high while maintenance reduces production

Brazil's crude oil production has been under pressure lately, after dropping by around 6.5% during the last three months, following an impressive start to the year. According to ANP (Agência Nacional do Petróleo, Gás Natural e Biocombustíveis), production stands at 2.56 million b/d, with a decline of around 1.3% year-on-year. This drop has primarily been driven by maintenance of the FPSO Cidade de Mangaratiba platform, operating in the Campo de Lula. However, exports of crude oil have been quite strong this year, having expanded by around 17% year-on-year between January and July 2019, as data by IHS Markit Commodities at Sea suggests.

There is still optimism, with the National Petroleum Agency (NPA) expecting Brazilian oil production volume to "reach one of the highest in the world" during the next couple of years. Two more auctions will be held this year, scheduled for October and November which will include pre-salt areas. Revenues could reach BRL 11 billion (USD 2.9 bn).

Meanwhile, state-led oil producer Petrobras is cutting spending by almost a third in 2019, as announced last week, with the company feeling the impact of a weaker Real and some delays in drilling activity together with problems faced with floating production units. The company now plans to spend around USD 10.5 billion this year, down from previous estimates of USD 16 billion. This forecast doesn't include any potential participation in domestic upcoming bid rounds.

Some of the world's oil majors have already confirmed their interest to expand further their exposure to Brazil, with Vitol planning to acquire 50% of Grupo Dislub Ecuador (GDE), which controls the country's sixth largest fuel station network. This move is quite similar to Glencore's decision to acquire a majority stake in Ale Combustíveis last year, with 1,500 gas stations across Brazil.

Posted 09 August 2019 by Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime & Trade, IHS Markit