Brazil Flows Mostly Holding Up Despite Coronavirus

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Brazil is maintaining both strong imports of gasoline and oil exports despite lower domestic demand and oil production cuts. Yet, exports of fuel oil have been hit by the global economic slowdown of recent months. Meanwhile, coronavirus cases in the country are spiking.

The South American country is one of the hardest-hit countries by the coronavirus, with more than 40,000 cases. This comes after President Jair Bolsonaro remained skeptical about quarantine measures, provoking widespread criticism and forcing local authorities to take stronger measures. The spread of the disease has reached Petrobras platform workers, sending dozens into quarantine and risking the spread of more cases at oil and gas facilities, according to Reuters.

In light of lower global crude and product demand amid the coronavirus crisis, Petrobras announced refinery run cuts and 200,000 bpd of production cuts.

Despite lower domestic demand, Brazilian gasoline imports in March reached a 5 month high, while middle distillate imports were slightly lower than in previous months. So far in April, refined product imports are looking normal. The majority of imports come from the US.

On the oil side of things, Brazilian exports last month remained above 1 million barrels per day, and they are likely to remain stable as lower refinery runs leave more crude available for export. Additionally, a rebounding Chinese economy, Brazil’s main importer, could help keep oil exports above the 1mn bpd mark.

Meanwhile, Brazilian fuel oil exports, which are largely IMO-compliant low sulfur barrels, almost halved in March compared to January and February, when IMO 2020 regulations first came into place. This drop is caused by several factors, but is most clearly tied to bunker fuel demand-destruction associated with the coronavirus. Cruise ships and container liners, regular buyers of bunker fuel, have scaled back operations, impacting global demand for LSFO.