A particular grade of heavy-sweet crude oil produced by Brazil is in high demand thanks to the International Maritime Organization’s upcoming sulfur cap. The new regulation goes into effect on January 1 and will limit the permissible sulfur content of marine fuels to 0.5 percent, down from its current level of 3.5 percent.
As a heavy-sweet crude, Brazil’s Ostra produces high yields of low sulfur fuel oil (LSFO) and gasoil. Both LSFO and gasoil will be in high demand because of the sulfur limit, and refiners will need more grades like Ostra as a result. This could further boost Brazilian crude exports, which are already considerably strong this year. Exports have been above 1 million barrels per day over the last three months, close to the highest on our records, as domestic oil production climbs to uncharted territory:
For Southeast Asia, arguably the busiest bunker market in the world, refiners are shifting their crude oil slates to prepare for the IMO spec change. They too are importing Ostra grade at a higher frequency.
Heavy-sour grades from Brazil are also important globally because they fill the gap that resulted from tight US sanctions on OPEC-member Venezuela. In August, we saw the Philippines and Norway import their first cargoes of Brazilian crude on our records. The Philippines took in the heavy-sweet Ostra, while Norway imported heavy-sour Marlim grade.
As the global importance of Brazilian crude grows, the nation’s energy sector is drawing in oil companies from big and small as President Jair Bolsonaro gears up for a privatization campaign. In August, the nation’s oil regulator, ANP, cleared companies from Australia’s Karoon to US supermajor Exxon Mobil for bidding for exploration rights in October.