• 4 minutes Mueller Report Brings Into Focus Obama's Attempted Coup Against Trump
  • 7 minutes Countries with the most oil and where they're selling it
  • 10 minutes Stack gas analyzers
  • 13 minutes What Would Happen If the World Ran Out of Crude Oil?
  • 17 hours Trudeau Faces a New Foe as Conservatives Retake Power in Alberta
  • 6 hours Ecoside
  • 14 hours Oil at $40
  • 5 hours Japan’s Deflation Mindset Could Be Contagious
  • 1 min US Military Spend at least $81 Billion Protecting OPEC Persian Gulf Oil Shipping Lanes (16% DoD Budget)
  • 20 hours Not Just Nuke: Cheap Solar Panels Power Consumer Appliance Boom In North Korea
  • 20 hours Haaretz article series _ Saudi Arabia: A Kingdom in Turmoil | Part 1 - Oil Empire
  • 10 hours Mueller Report Brings Into Focus Trump's Attempts to Interfere in the Special Counsel Investigation
  • 16 mins "Undeniable" Shale Slowdown?
  • 2 days Is Canada hosed?
  • 15 hours Negative Gas Prices in the Permian
  • 15 hours Gas Flaring
  • 1 day The Number Increases: Swiss To Support Belt And Road Push During President's China Trip
Alt Text

Oil Rebounds On Bullish Inventory Data

Oil prices recovered somewhat on…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Trending Discussions

Has Brazil's Oil Boom Been Overstated?

Recent hiccups for Brazilian oil supply call into question the growth projections for the country, with implications for the global oil market.

Brazil’s oil production slipped by 65,000 bpd in January, falling to 2.73 million barrels per day (mb/d). Compared to a year ago, January’s production levels were flat, “as maintenance and declines from mature fields offset growth from new start-ups,” the IEA said in its March Oil Market Report. The IEA went on to say that “[o]utput should rise in February following the start-up of the P-67 platform in the Lula Norte area and the P-76 at Buzios.”

However, production fell again to around 2.5 mb/d in February.

The IEA had estimated that Brazilian production would increase by 375,000 bpd this year to about 3.3 mb/d by the end of the year. For the full-year, the IEA expects Brazil to average 3.07 mb/d.

The setback does not necessarily ruin the IEA’s projection, but it will be much harder for Brazil to reach those levels after seeing output decline for two months. Brazil was expected to be producing a few hundred thousand barrels per day higher than it actually was in February. Growing output by 350,000 bpd in 2019 from last year’s levels now looks ambitious, particularly since output is now actually below last year’s average of 2.7 mb/d.

This is not only a problem for Brazil. The country has been widely cited as one of the very few countries aside from the U.S. that would add meaningful volumes of new oil supply this year. That is particularly true when excluding hypothetical increases from OPEC, should the cartel abandon its production cuts.  “For the year as a whole, non-OPEC oil supply growth is expected to slow from a record 2.8 mb/d in 2018 to 1.8 mb/d. The US continues to account for the bulk of the expansion, adding 1.5 mb/d, or 83% of the total,” the IEA wrote in March. “Other increases will come from Brazil, where a number of new production units are currently ramping up.” Related: Why Oil Prices Rallied 30% This Year

The only other non-OPEC country that could add significant new supply is Canada, and Canada’s infamous pipeline bottlenecks are likely to restrain growth. Some Canadian companies have already announced their decision to hold off on new investment and supply expansions because of pipeline constraints and policy uncertainty following Alberta’s mandatory production cuts.

To be sure, the new platforms that are starting up in Brazil this year are still expected to add significant volumes of new supply. “Brazil is on the verge of major supply growth,” Francisco Blanch, head of commodities research at Bank of America Corp., told Bloomberg in February. “U.S. shale is not the only driver of increased volumes.”

Brazilian officials boasted about a turning point. “Brazil is reaching a new level of production and that is a fact,” Decio Oddone, head of the country’s oil regulator, the National Petroleum Agency, said in a February interview with Bloomberg. “2019 will be critical.”

But existing fields needing maintenance continue to undercut overall output. Some mature fields have also suffered from significant decline rates. This has been a perennial problem for Brazil. The production declines in January and February raise the prospect that Brazil could disappoint once again. Related: Aramco’s Mega Debt Deal Is A Raging Success

On top of that, the quality of oil coming from Brazilian pre-salt fields is of the type that is in high demand right now. Medium and heavy oils have been increasing hard to come by with the severe disruptions in Venezuela, declines in Mexico, constraints in Canada, disruption in Iran and otherwise production restraint from the rest of OPEC. Those countries tend to produce medium and heavy oil. Meanwhile, light sweet oil from the U.S. has been found in extraordinary abundance. As a result, if Brazil undershoots expectations, it will not only affect global supply on an absolute basis, but also in terms of quality.

The Brazilian government is hoping to move forward on new auctions that could lead to future development. Regulators revealed higher bonuses for an upcoming auction in October in the Campos Basin. But any oil and gas that may result from such an auction are years away.

The main question over the next year or two is if the large volumes coming online from new projects turn out to be offset or somewhat mitigated by declines and maintenance elsewhere.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News