Brazil's Petrobras sets record for bunker fuel exports in February

Rio de Janeiro — Brazilian state-led oil producer and refiner Petrobras set a fresh monthly record for bunker-fuel exports in February, after the company made a strategic shift to enter the global market as a key supplier, it said in a statement Wednesday.

Petrobras shipped 238,000 b/d of bunker fuel and fuel oil abroad in February, with shipments topping more than 1 million metric tons during the month, the company said.

In a separate data released Tuesday, Brazil's National Petroleum Agency, or ANP, said that the country exported 6.1 million barrels of bunker fuel in January. That was a 57.3% year-on-year jump from January 2019, according to the ANP.

The record-setting exports came despite the coronavirus outbreak in China, Brazil's leading trade partner and an important hub for global shippers. Many companies halted deliveries, including Petrobras, after China shuttered ports and quarantined areas hard-hit by the virus. The move disrupted global shipping markets, causing prices for bunker fuel to decline sharply.

Petrobras made the decision in the second half of 2019 to target global bunker fuel markets ahead of the International Maritime Organization's mandate to reduce the sulfur content in bunker fuel to 0.5% starting January 1 from 3.5% previously. Many companies started to transition to low-sulfur fuel ahead of the January 1 deadline.

"The new global specification for maritime fuels, or IMO 2020, that reduced the level of sulfur in bunker fuel to 0.5% from 3.5%, has generated a unique opportunity for Petrobras given that not only the crude oil but also the bunker fuel produced by the company hold low levels of sulfur," Petrobras said.

Brazilian heavy crude grades are sweet and natural contain less than 0.5% sulfur, making them an ideal and lucrative crack for the new IMO standard. Petrobras increased bunker fuel output at its 13 operated refineries, while other oil producers in Brazil benefited by selling domestic grades at narrower discounts to Brent than historically seen.

Independent oil and natural gas producer Enauta, which owns a 50% operating stake in the Atlanta Field, said that the company expected the grade's discount to Brent to fall to single-digits in the fourth quarter.

Petrobras also said that crude oil exports remained elevated in February at more than 690,000 b/d. The strong export volumes came despite the "challenging" global scenario the coronavirus caused by restricting demand in Asia, the primary market for many of Petrobras' products, the company said. Petrobras adjusted trade flows and increased oil and bunker-fuel shipments to the Caribbean, Europe and the US, among other markets, the company said.

"It's important to note that it's not yet possible to estimate with any precision all of the impacts that the company could suffer in relation to its operations and results, given the impact surrounding COVID-19's impact on the global economy," Petrobras said.

In late January, Petrobras CEO Roberto Castello Branco said that he expected the virus' impact to be limited to a month or two and contained in the first quarter.