As the latest weekly inventory report from the EIA shows builds to both crude and gasoline, prices have reversed course and are charging lower. Hark, here are six things to consider in energy markets today.
1) Brazil is considering scrapping nationalistic oil legislation – which was implemented by President Dilma Rousseff – in favor of a concession model which would attract more international investment. While the legislation was put in place to primarily benefit Petrobras, widespread corruption in the state-run oil company and low oil prices have led to the change of heart. While the changing of legislation may take up to a couple of years, its implementation would remove the obligation for Petrobras to operate all oil fields – encouraging outside investment.
According to our ClipperData, Brazilian crude exports averaged just shy of 600,000 bpd last year and are currently closer to 560,000 bpd this year. The leading recipient of Brazilian crude is China, accounting for about a third of exports. Brazil currently has a $10 billion credit line with China, which it is repaying in cash or oil, depending upon China’s request.
This is in addition to a deal where Petrobras sends up to 200,000 bpd per month to China, in along-term deal struck in 2009 (hark, their last financial crisis). Uruguay is a close second in terms of export volumes, while the U. S is a distant third, accounting for ~10 percent. India is fourth.
This post was published at FinancialSense on 07/27/2016.
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