Brazilian liquids output, ex-biofuels, was slightly higher m/m at 2.72 mb/d in December 2017, but lower y/y by 0.12 mb/d. Crude output declined at its fastest pace in 21 months, by 0.12 mb/d y/y, due to a combination of a high base, lingering outage impacts and declines in the Campos basin that hit 15% in December and averaged 13% across H2 17. At the field level, Jubarte (-17%), Marlim (-17%) and Marlim Leste (-19%) accounted for 82 thousand b/d of the 0.12 mb/d decline in crude. Across 2017, crude growth was limited to 0.1 mb/d, which came despite an impressive 0.27 mb/d average growth rate in H1 17. This year, we peg production growth at 0.23 mb/d, driven by the start-up of an unprecedented eight new systems—together boasting a peak capacity of 1.1 mb/d. We understand that the 0.15 mb/d Lula North system in the pre-salt, and the 0.1 mb/d Tartaruga Verde and 20 thousand b/d Mestica systems in the post-salt (all delayed from Q4 17), will come online in Q1 18, although there is presently no indication of exact start dates. Any further delay will once again lead to Brazilian output surprising to the downside.
Brazilian oil demand fell by 25 thousand b/d y/y to 2.33 mb/d, the first decline in eight months. Gasoline demand fell y/y by 74 thousand b/d as fuel tax hikes pushed up domestic prices, taking overall demand to 0.78 mb/d. Diesel demand recorded a fifth straight month of growth, rising by 10 thousand b/d y/y. Inland fuel oil usage fell for the first time in six months, by 19 thousand b/d y/y to 39 thousand b/d, the lowest levels on our records dating back to 2000, as higher hydro generation on recovering reservoir levels limited power demand for fuel oil. Brazilian refinery runs fell by 0.15 mb/d m/m in December to 1.65 mb/d but were up by 39 thousand b/d y/y. Total oil product imports rose y/y by 0.16 mb/d to 0.58 mb/d, led by stronger diesel imports.