Brazilian liquids output ex-biofuels rose m/m by 26 thousand b/d to 2.79 mb/d, higher y/y by 0.14 mb/d (although the slowest pace since August 2016)—assisted by the connection of three new pre-salt wells which fuelled record high output at both Lula and Saphinoa. P-66 produced 26 thousand b/d from one well in its first complete month of operation, and two more wells are expected to come online before year-end. Output from FPSO Cidade de Saquarema plateaued in June, 11 months after first oil. The P-67 Lula North is currently at a shipyard in China and is expected to produce first oil in December. Thus, production should ramp-up across H2 17, although y/y growth rates will be tempered by a high base and by maintenance at two other units at the Lula field in H2 17. Crude exports hit a record high of 1.45 mb/d in June, higher y/y by 0.58 mb/d. Across H1 17, exports averaged 1.1 mb/d, a level we expect will be eclipsed in H2 17 as production continues to grow. High exports supported a 9 mb crude stockdraw in June.
Brazilian oil demand rose by 31 thousand b/d y/y to 2.39 mb/d, led by gasoline demand growth accelerating to a seven-month high of 82 thousand b/d y/y, supported by rising car sales (+15.5% y/y). Diesel demand increased by 13 thousand b/d y/y, boosted by increases in industrial production. However, growth in both products may slow in the coming months following tax increases on all fuels on 21 July—although ethanol might claw back some market share given it only faces a tax increase of less than a third of what will be applied to gasoline. Refinery runs fell by a further 26 thousand b/d m/m to 1.71 mb/d, although these should rise in the coming months as Revap returns from maintenance. Products imports rose by a massive 0.22 mb/d y/y, with diesel imports just under twice as high y/y, at 0.26 mb/d.