Brazilian liquids production fell m/m by 57 thousand b/d to 2.67 mb/d in March, but was higher y/y for just the second time in the past eight months― due to a low base driven by maintenance last year. Across Q1 18, production was lower y/y due to steep declines in the Campos (14%) and delays to new projects. In March, Campos output was pegged at 1.2 mb/d, lower y/y by 0.17 mb/d, which was offset by growth of 0.2 mb/d in the Santos, where Lula output was higher y/y by 0.2 mb/d. Strong production at Lula likely continued into April, with the 0.15 mb/d P-66 unit hitting peak capacity. In March (latest data available), P-66 produced 0.1 mb/d, higher m/m by 14 thousand b/d. The late April start-up of the 0.15 mb/d Buzios I system should continue to support pre-salt output. However, all other projects have been delayed relative to original estimates. The 35 thousand b/d Atlanta field started this month (vs. Q1 18), while the 0.1 mb/d Tartaruga Verde system has been pushed back to an end-June start (vs. Q1 18). The other five systems are currently not expected to produce before December. It is now likely that only three systems will contribute meaningfully to 2018 supplies, compared to original estimates of eight new systems with a combined capacity of 1.1 mb/d starting in 2018. The net effect is a flat 2018 production profile, with unplanned outages likely to reverse output into y/y declines.
Brazilian oil demand fell by 26 thousand b/d y/y to 2.38 mb/d. Gasoline led the decrease, falling y/y by 66 thousand b/d to 0.74 mb/d. However, this was fully compensated for by the 74 thousand b/d y/y rise in ethanol demand. Diesel demand weakened for the first time in 11 months, lower y/y by 5 thousand b/d at 0.98 mb/d. Total products imports were down y/y by 13 thousand b/d, at 0.58 mb/d, led by lower gasoline and naphtha imports.