China is increasingly turning to Brazil to make up for the fall in oil imports it has seen out of traditional crude destinations in the Middle East and Venezuela with significant ramifications for the VLCC trades.
OPEC cuts have seen Saudi exports to China slow growth while sanctions on Venezuela have turned the taps off another key crude nation for Asia’s largest country.
In its latest weekly report brokers Gibson note that Brazil has been a big beneficiary of this changing crude pattern, saying volumes have “surged” in recent months.
“Many modern Chinese refiners are set up to run most effectively on heavier grades of crude, but with heavy crude production suffering of late, demand from China – and globally – has soared for Brazil’s heavy grades,” Gibson reported.
Petrobras stated in their annual report that 66% of their crude exports in 2018 went to China. Q1 2019 imports of Brazilian crude to China averaged over 665,000 barrels per day, up 67% from Q1 2018’s average of 400,000 barrels per day. Brazil’s production is set to increase over 350,000 barrels per day this year according to the IEA. “With significant refinery capacity due to come online in 2019 and crude production in the Middle East remaining constrained, Brazilian crude exports to China should increase further, providing a supportive outlook for VLCCs heading West to East,” Gibson predicted.