Oil: Brazil breaks export record in March – 03/31/2023 – Market

Foreign sales of oil from Brazil hit a record in March, just when an export tax on the commodity suddenly announced by the government came into force, without the oil companies having room for maneuver to reposition shipments, pointed out government data and specialists.

In the accumulated result for this month until the 24th, the volume of oil exported from Brazil totaled 9.4 million tons, up 75.4% compared to March in 2022, according to the Foreign Trade Secretariat (Secex), which should contribute with an increase in the collection of the Union.

The increase comes after months of oil production in Brazil at the highest levels ever recorded, while demand at Brazilian refineries was weak, at least in January, according to official data.

The new tax on exported oil, of 9.2% and which will last for four months, was announced by the government on February 28th, one day before it starts to be levied on March 1st, in order to offset the decision of the Union to partially maintain a tax exemption on fuels.

The tribute was created by provisional measure and has been the subject of questioning by oil companies, specialists and political parties, who even appealed to the Federal Supreme Court (STF) to challenge it.

“Despite having this extra tax on exports, there were already contracts (for exports), the ‘lifting’ calendar (oil withdrawals by oil companies on the high seas) had already been agreed for each field, there was no way to change it”, Wood Mackenzie’s exploration and production research director, Marcelo de Assis, told Reuters.

In large offshore Brazilian fields, where oil companies are present in addition to Petrobras, it is common for concessionaires to take turns to remove the oil they are entitled to on the high seas every time the tanks on the platforms of the asset in question fill up. This schedule is agreed in advance, which, given the new tax, may indicate that one oil company has been more affected than another by the export tax at this time.

“When you agree on the lifting schedule, you agree on shipowners —the ships that will do the ‘lifting’— and close the end with the buyers. It is not something that it is possible to have flexibility to maintain in the domestic market.”

Assis also pointed out that “February is a short month” and that it is possible that some loads went to March, contributing to the record.

In a note to Reuters, the Brazilian Petroleum Institute (IBP), which represents oil companies in Brazil, said that this month’s result was also influenced by a much lower level of vessels in February, when the country exported around 2.5 million tons, the lowest volume for the month since 2015.

According to data cited by the IBP, the previous record for oil exports from Brazil had been obtained in December 2019, with 8.5 million tons.

The total volume of oil exported by Brazil in March will be published by Secex next Monday (3).

In the first quarter, exports rose 15% compared to the same period in 2022, considering partial data from March, according to the IBP, which avoided explaining in more detail the reasons for the increase in exports.

Petrobras, the country’s largest oil producer and refiner, in turn, declined a request for comment.

PRODUCTION AND DEMAND BALANCE

A source from the oil company pointed out, however, that the export volume only follows the balance of production and demand from refineries in Brazil, which is the natural consumer. “If there is any refinery under maintenance, or the demand for derivatives is low, the national consumption of oil drops, leaving more to export. If there is an increase in oil production, ditto,” he said.

Petrobras previously informed that it would start on March 10 the biggest maintenance stoppage ever carried out at the Presidente Bernardes de Cubatão Refinery (RPBC), in São Paulo, lasting 60 days and investments totaling 720 million reais.

Oil production in Brazil broke a record in January and registered the second highest volume in February, according to the most current data published by the regulator ANP. March data is not yet available. Information on refinery processing in February and March has not yet been published.

StoneX’s Market Intelligence analyst, Bruno Cordeiro, thought it necessary to wait for more current data on oil production and refinery consumption. But he pointed out that there may have been something similar to what was recorded in the first month of the year.

“In January, there was a surplus of oil available for export… production grew by 8% compared to January 2022, while domestic consumption (of oil by refineries) fell by 13.4%”, he said.

“Perhaps we will have a similar scenario for March… it may be that production has continued heated, while the consumption of refineries has not avenged, creating this exportable surplus.”

When contacted, the regulator ANP said it would not comment on the report, since it did not yet have consolidated data from Secex for March.