Brazilian liquids production fell by 15 thousand b/d m/m in July to 2.69 mb/d, lower y/y by 48 thousand b/d and down for the third consecutive month. Campos basin output was lower y/y by 0.15 mb/d (12%) at 1.13 mb/d. Since peaking at 1.8 mb/d in December 2014, production has fallen by almost 0.7 mb/d. The severity of the declines there outpaced 0.13 mb/d of y/y growth in the Santos basin, where output equalled a record 1.3 mb/d as pre-salt output rose to 1.45 mb/d from 87 wells. These production trends were reflected in the composition of Brazilian output, with light crudes making up a record high 40% of output while heavy crude accounted for only 14% (0.35 mb/d), compared to 26% (0.7 mb/d) of heavy output produced as recently as 2016. While steep declines are likely to continue for the balance of 2018, we expect new production units in both the pre-salt and the Campos to support 0.28 mb/d of growth in 2019.
Brazilian oil demand decreased by 20 thousand b/d y/y to 2.34 mb/d as gasoline demand fell by 0.15 mb/d y/y to 0.6 mb/d in July. Gasoline demand continued to drop as consumers remained incentivised to use ethanol for light vehicle use. Ethanol demand increased by 0.11 mb/d y/y to 0.24 mb/d. Despite a surge in domestic ethanol production, ethanol imports increased by 14 thousand b/d y/y to 28 thousand b/d, while exports of gasoline rose by 20 thousand b/d y/y to 24 thousand b/d. Distillate demand increased by 32 thousand b/d y/y to 1.0 mb/d. Refinery runs grew for the fourth consecutive month, up by 0.17 mb/d y/y to 1.86 mb/d. However, an explosion on 20 August at the 0.23 mb/d CDU of the 0.43 mb/d Replan refinery, put Brazil’s plans of raising refinery runs on hold, as the CDU will be offline for over two months. So, August crude exports jumped by 0.2 mb/d m/m, and we expect exports to remain high in September.