Xiu Ying, Contributing Reporter
RIO DE JANEIRO, BRAZIL – The U.S. sanctions on Venezuela’s oil industry have tightened the global crude oil market. Oil buyers are intensely looking for alternatives to the heavy Venezuelan oil.
As London based global information provider IHS Markit points out, OPEC would be the first response. But the cartel agreed to reduce its output and keep its shipments around 23 million barrel per day, much lower than the levels last seen in October 2018.
Refiners in the United States and Europe have therefore started to replace Venezuela’s oil with some of the crudes produced closer to their home. China has also been looking to Venezuela’s neighbors to fill in some of the gaps.
Imports from Brazil have recently surged, with several Chinese refiners rushing to import heavier grades of crude from Brazil. Petrobras reported that China absorbed two-thirds of its crude exports in 2018.
According to recent data provided by IHS Markit’s Commodities at Sea, Brazil exported more than half a million barrels directly to China during this year’s first quarter, with the volumes reaching around 660,000 barrels if we include shipments to Singapore and other destinations across Southeast Asia that were later re-exported to China. The increase in year-on-year is estimated to have reached almost 50 percent so far.
Bearing in mind that Brazilian output is expected to further increase by around a third to a million barrels by the end of this year, IHS Markit expects flows to China to strengthen much more in the second half of 2019.
If Brazil were to deliver on the production growth that major organizations continue to predict, it could gain a foothold on the most prized market for every oil producing nation – China.