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United States sanctions on the Venezuelan oil industry have tightened the global market for heavy to medium crude oil, pushing oil buyers to look for alternatives to Venezuelan heavy oil.
Refiners in the United States and Europe have begun to replace Venezuelan oil with some of the crude oil produced closer to home, while the world's largest importer of oil and the main driver of demand growth, the China, were also seeking to replace its Latin American neighbors. a part of the gap.
Brazil is becoming a big winner of sanctions imposed on Venezuela. It increased its oil exports to China in the first quarter of 2019 and is expected to further increase its sales and market share of the world's largest crude importer, since Brazil and the United States are one of the few countries in the world. non-OPEC members able to significantly increase their production in the short term, says IHS Markit.
However, Brazil has shown volatility in oil production and exports in recent months as some months 'figures are below analysts' estimates.
If Brazil were to achieve the growth in production that large organizations continue to predict, it could establish itself in the most popular market for all oil-producing countries, China.
With Venezuelan oil sanctioned, the first alternative for buyers would naturally be more medium and heavy crude oil from OPEC, mainly from its Middle Eastern producers. However, producers in the Middle East mainly cut these qualities as part of the OPEC + production cuts, while Iran's heavy oil remains stuck under US sanctions. Canada has its own production problems with the constraints of carrying capacity and can not take full advantage of the shortage of heavier grades with the sanctions imposed on Venezuela by the United States. Related: Chinese demand "strong like rock" drives up oil prices
China has therefore increased its imports from Brazil.
Brazilian state oil company Petrobras said China had absorbed two-thirds of its crude oil exports last year, recalls IHS Markit.
According to IHS Markit data, Brazil exported more than 500,000 barrels / day directly to China in the first quarter of 2019, writes Fotios Katsoulas, Senior Analyst of Liquid Bulk, Maritime & Trade, at IHS Markit.
Including shipments to other parts of Asia, later re-exported to China, total Brazilian exports to China reached about 660,000 b / d in the first quarter. According to IHS Markit, Brazilian exports to China would have jumped nearly 50% in one year in the first quarter.
Given the expected growth in Brazilian production, Brazilian oil exports to China could "strengthen much more in the second half of 2019," said Katsoulas.
China, however, will have to compete with other importers of the Brazilian shade Lula, much appreciated by buyers, including the United States after the sanctions imposed on Venezuela, estimates the analyst of IHS Markit.
Lula quality has recently been the subject of strong demand and Chinese refiners, although preferring Lula among Brazilian crudes, are buying more and more new Buzios medium heavy grade.
In the future, it is Brazil's game to lose in the race to strengthen its shares in the Chinese market.
Brazil has not managed to get the strong production growth expected in recent years due to various project delays, but this year the International Energy Agency (IEA) and I OPEC sees the Latin American producer boosting its oil supplies.
Recent estimates from the IEA and OPEC show that Brazil's production will grow by more than 300,000 barrels a day this year and that Brazil will post the second-fastest-growing supply of non-member countries. OPEC, just behind the United States.
However, Brazil's production in January and February of this year decreased, with maintenance and declines in mature fields exceeding new releases.
"However, market experts have expressed skepticism about Brazil's ability to maintain its growth forecasts, as the country's shipments fell in January before recovering in February and again slightly down in March. Last year's performance helps us understand how volatile Brazilian cargo can be, "says Katsoulas of IHS Markit.
By Tsvetana Paraskova for Oilprice.com
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