Tankers: Atlantic Crude Supply on the Rise

The Atlantic crude tanker market has seen increased supply boost over the past few months, a trend which could be set to continue. In its latest weekly report, shipbroker Gibson said that “Brazilian crude production has been posting strong performance in recent months as the key Latin American producer is expected to see crude output this year increase by 380kbd to 3.5mbd and a further 300kbd in 2024 to reach 3.8mbd. Crude exports have also been growing, with Q3-23 averaging 1.8mbd according to the latest IEA data helping to boost Atlantic crude supply alongside other producers such as the US, Guyana and now Venezuela. Much of this increase in output can be explained by the reactivation of several FPSO units in the country’s offshore pre-salt fields. While further output is expected in the coming years, with Petrobras set to increase investment by 31% to $102 billion until 2028 as part of an ambitious plan to increase production further”.

According to Gibson, “recent export data shows the bulk of Brazil’s crude exports continue to head East to China as well as sizeable volumes to Europe and the US. This year, crude volumes to China have averaged 775kbd, up from 505kbd last year, much of which was medium sweet Tupi and Buzios grades. Meanwhile, exports to Europe have also risen from 280kbd in 2022 to 395kbd in 2023. It is interesting to note that for these additional flows to Europe, VLCCs have benefited the most, with year-on-year flows doubling, (albeit from a low base). Brazilian crude exports to Europe continue to be popular amongst refineries in Spain, Portugal and the Netherlands. Higher VLCC shipments from Brazil to ARA refineries have accounted for much of the increase this year, with a broad mix of mostly medium sweet grades discharging in the region”.

“Additionally, higher Brazilian output in the coming months could fill the gap left by lower OPEC+ Middle East volumes heading to Asia, depending on how many Middle Eastern barrels will be affected by the latest voluntary production cuts. If there is a shortfall in volumes traded to Asia, then Brazilian supplies could help to fill this void. However, overall Asian demand into next year remains a key sensitivity, especially given recent Chinese demand indicators highlighting concerns in the near term”, the shipbroker added.

Meanwhile, “looking further ahead, the IEA is forecasting Brazilian supply to increase 970kbd by 2028, with a total of 15 FPSOs expected to be operational by then. There is also strong potential for an additional three units which are currently at a pre-FID stage but would bring up to an additional 360kbd of output online on top of projects already planned. However, it is also noted that one of the main risks with achieving this output level is the potential for delays in project start-ups or unforeseen operational issues, which combined with a base production decline of 10-15% a year could easily see supply forecasts revised down should current projects not go entirely to plan”.

“There is also the issue of Brazil aligning itself more closely with OPEC+ in the future, however for now there is little indication this could derail existing plans. Therefore, the next few years will be crucial to see if this output momentum can be sustained and whether these investment projects come online as expected. Overall, we should expect to see higher cargo counts out of Brazil going forward as this momentum gathers pace”, Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide