Brazilian Exports Spike in March

For the first time in three months, Brazilian seaborne exports managed an increase, spiking to 1,222 kbd, higher by a whopping 270 kbd m/m and 331 kbd y/y. The rise in exports was partially driven by higher shipments leaving Angra Dos Reis, which were up 131 kbd to end the month at 430 kbd.

Brazilian production remains in central focus as one of only a few non-OPEC countries, alongside the United States and Canada, that can significantly increase global production capacity growth over the next several years. So far through 2018, total seaborne exports have been largely inconsistent declining from a massive 1,359 kbd total in December of last year down to just 952 kbd in February before spiking again in March. If Brazil wants to become a dominant global producer, export stability is key, especially to places like China, which depend on a steady stream of Brazilian crude oil.

The exploration and production of Brazil’s pre-salt offshore blocks are a vital piece in improving Brazil’s export capacity moving forward. Last week, BP, Shell, Statoil and Wintershall, among others, were all big players in the offshore auction that saw 22 blocks successfully sold, raising USD2.4 billion. Exxon Mobil was the biggest winner, taking controlling stakes of two blocks in both the Santos Basin and Sergipe-Alagoas Basin and an additional four blocs within the Campos Basin. Wintershall was particularly aggressive in the Potiguar Basin, taking control of three blocks within that particular area.

 

March Iraqi Maintenance Pulls Down on Exports

After a strong two months to begin the year, Iraqi southern exports realized a moderate 171 kbd m/m decline to finish March at 3,461 kbd, a first under 3,500 kbd since last October. The decline was largely expected following an announcement from SOMO (The State Organization for Marketing Oil) that exports would not exceed 3,426 kbd in March. Much of the decrease was a result of maintenance at the SPM 1 berth, which is part of the offshore Al Basrah Oil Terminal. SPM 1 has not seen any vessels enter the berth since February 27th. Maintenance operations should be completed at some point this month.

Oil exports from northern Iraq remain largely in flux. The main export avenue for crude produced in the Kirkuk region remains along the KRG controlled pipeline that extends to the Ceyhan port complex in southern Turkey.  The problem is that the largest producing fields (Bai Hassan, Avana, Baba Dome) were reclaimed by Baghdad in October of last year after fighting broke out with the KRG and yet, there remains no clear agreement in place between the two governmental entities. This has created a situation where Baghdad has sought new short- term solutions to evacuate crude production from the region, including an oil-swap with Iran that has faced delays due to security concerns along the Iranian border. Kirkuk export flows out of Ceyhan finished March at 310 kbd, down 90 kbd m/m and slightly below the Q1 2018 average export level.

Surging U.S. Seaborne Exports March

U.S. seaborne exports surged to 1,863 kbd for week-ending 3/30/2018, marking the second highest weekly value in 2018 and the fourth highest volume of all time. Even among escalating rhetoric between the United States and China over tariffs and other trade restrictions, 459 kbd of U.S. crude flowed towards the East-Asian nation-state, marking a fourth straight week of 200+ kbd shipment levels. China has slowly become an important purchaser of U.S. crude since the ramp in exports began last October. The United States also shipped crude to the United Kingdom (269 kbd) and Italy (164 kbd) among others. A 500,000 bbl shipment of crude departed towards Colombia for the first time since early February.

The surge in weekly exports tends to align with U.S. inventories, which drew by 4.62 million barrels. The draw was a distinct flip w/w as the 1.64-million-barrel build in week-ending 3/23/2018 was largely the result of seaborne imports finishing at 4,537 kbd, higher by a whopping 996 kbd w/w. Looking forward to April, U.S. atmospheric crude distillation maintenance is expected to expand in PADD 1 (125 kbd), PADD 4 (44 kbd) and PADD 5 (195 kbd) while falling in PADD 2 (206 kbd) and PADD 3 (276 kbd).

Over the past several weeks, China and the United States have escalated rhetoric regarding tariffs on goods flowing between the two nation-states. Both countries have floated proposals listing products that could face duties, although no actual policy has yet been implemented. For now, it appears the Chinese have excluded crude oil from the list of U.S. items that could face import taxes, instead focusing on chemicals and inputs/outputs of plastics production.