Brazilian liquids output ex-biofuels rose m/m by 0.12 mb/d to 2.77 mb/d in May, higher y/y by 0.18 mb/d. Biofuel output, however, was lower y/y by 89 thousand b/d at 0.57 mb/d, reducing total liquids output growth to just 92 thousand b/d. The 0.1 mb/d Cidade De Angra Dos Reis pre-salt unit continued to ramp up to capacity following maintenance, while the P-66 unit in Lula South started up towards month-end, helping pre-salt output rise m/m by 4.8% to 1.27 mb/d. In the post-salt, the P-37 (Marlim) platform returned from work and a new well started in the Marlim Sul field. We expect output to have risen further in June driven by the first full month of output from P-66, although the pace of growth is likely to have eased as the P-35 platform in the Marlim field was impacted following a leak. The field produced 24 thousand b/d across Q1 17 from 10 producing wells. In July, the 50 thousand b/d Libra EWT is expected to start-up.
Brazilian oil demand returned to growth in May, up by 35 thousand b/d y/y to 2.31 mb/d. Gasoline led the gains, up y/y by 72 thousand b/d to 0.77 mb/d supported by lower prices (Sao Paulo gasoline prices were 1.8% lower y/y). Diesel demand grew by 23 thousand b/d y/y—the fastest annual pace since June 2015. In contrast to gasoline, ethanol demand fell by 56 thousand b/d y/y, in line with lower ethanol production. For instance, hydrous production in May was 17% lower y/y. Maintenance at the Revap refinery pushed runs down by 58 thousand b/d m/m to a four-month low of 1.74 mb/d. While diesel imports remained high at 0.16 mb/d, overall product imports dropped m/m by 0.12 mb/d primarily driven by lower naphtha imports. Crude exports rose to 0.80 mb/d, up y/y by 0.27 mb/d, although higher crude output and imports along with lower refinery runs offset strong exports, leading to a steep 8.6 mb crude stockbuild in May.