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Brazilian total liquids output increased y/y by 0.12 mb/d to 2.83 mb/d in May (the first gain in four months), led by crude production, which rose to a record 2.73 mb/d (+0.13 mb/d m/m). Pre-salt led the crude growth, rising to 1.67 mb/d (+0.2 mb/d y/y), driven by the Buzios field where output has doubled to 0.23 mb/d in the space of three months. Campos basin output recovered (+31 thousand b/d m/m) with declines moderating to 8% in May, having averaged 15% between February and April. Most notably, there was a 67 thousand b/d m/m recovery in Jubarte output, which rose to a two year high at 0.22 mb/d. Despite expecting post-salt declines to ease, we have revised our 2019 crude growth forecast lower, from 0.25 mb/d to 0.16 mb/d following a weak H1 19 (flat y/y). The revision was driven by a change in the production profile across all pre-salt systems (see E-mail alert: 26 June 2019). Crude exports rose y/y by 0.26 mb/d to 1.12 mb/d in May, but were lower m/m with bookings to China down by 47%. However, flows to the US increased by 22% m/m and are likely to stay supported by low USGC refinery maintenance.
Brazilian oil demand rose by 0.36 mb/d y/y to 2.36 mb/d in May. Distillate demand rose by 0.21 mb/d y/y to 0.97 mb/d, a significant increase driven by the truckers strike that depressed demand in May 2018. Gasoline demand increased by 15 thousand b/d y/y to 0.64 mb/d, after 20 consecutive months of y/y reductions. Ethanol demand was up by 0.11 mb/d y/y to 0.38 mb/d, some 0.13 mb/d above the five-year average. Refinery runs fell by 0.13 mb/d y/y to 1.72 mb/d. Despite the y/y increase in gasoline demand in May, price incentives continue to push refiners to max distillate mode, as gasoline yields have fallen by 3.7 ppts since peaking at 26.7% in January 2018. In comparison, distillate yields have risen by 4.8 ppts.