Brazilian liquids production in May rose m/m by 11 thousand b/d to 2.73 mb/d, lower y/y by 43 thousand b/d. The fall was driven by the Campos basin, where output plunged to 1.16 mb/d (-0.26 mb/d y/y) as decline rates rose to 18%. We had assumed a 15% decline, so actual output was 38 thousand b/d below our forecast. Crude output was at 2.61 mb/d (-46 thousand b/d y/y) in May, leaving January–May production tracking lower y/y by 22 thousand b/d. We would expect output to improve in H2 18, however, given a low base and the ramp-up of three systems: 0.15 mb/d Búzios-1, the 35 thousand b/d Atlanta field and the 0.1 mb/d Tartaruga Verde platform, which produced first oil in April, May and June respectively. Atlanta and Tartaruga Verde produce from medium/heavy post-salt reservoirs, which should help to ease net decline rates in the Campos. Still, underlying declines at large fields such as Roncador are expected to stay elevated (13% in the year-to-May). Elsewhere, pre-salt output was higher y/y by 0.2 mb/d, supported by output from Lula (+0.18 mb/d y/y) and Mero (+40 thousand b/d y/y) We expect flat production growth in 2018, rising to 0.3 mb/d in 2019 as 0.8 mb/d of new capacity is expected to start up.
Brazilian oil demand fell by 0.30 mb/d y/y to 2.01 mb/d, with diesel demand plummeting below 0.77 mb/d, the lowest level since January 2011 and 0.17 mb/d lower y/y, while gasoline demand fell to 0.62 mb/d, lower y/y by 0.15 mb/d, partially offset by a 55 thousand b/d y/y rise in ethanol demand to 0.26 mb/d. A nine-day truckers’ strike blocked highways and fuel distribution channels across Brazil, resulting in reduced products demand. Refinery runs grew by 0.11 mb/d y/y to 1.85 mb/d, with crude exports slightly lower m/m at 1.03 mb/d. Crude stocks fell by 3.7 mb.