Brazil's Petrobras sees Q1 refined product sales slide 4.9% on year

Rio de Janeiro — Brazilian state-led oil producer and refiner Petrobras registered a 4.9% year-on-year slide in refined product sales in the first quarter of 2019 amid a sharp slide in domestic demand caused by coronavirus-related shutdowns at home and abroad, although indications that social distancing measures will ease in May brightened the second-quarter outlook.

"The negative effects of the global recession provoked by the public health crisis didn't impact the performance of sales and production in a substantial way during the first quarter," Petrobras said in a production report released late Monday.

Petrobras sold an average of 1.630 million b/d of diesel, gasoline and other refined products in Q1, down from 1.715 million b/d in the year-ago period, the company said. Q1's sales also fell 5.4% from 1.725 million b/d in the fourth quarter of 2019, Petrobras said.

Domestic refined product demand was undercut by the coronavirus outbreak throughout Q1, with key trading partner China starting a series of lockdowns in January that filtered around the world and were implemented in Brazil in mid-March. Petrobras responded to the crisis by slashing output by 200,000 b/d and refinery run rates to 60%.

While the death toll and infection rate continued to rise in Brazil, some cities started to ease social distancing restrictions and open non-essential businesses over the past week that could signal the start of a rebound. The more positive outlook caused Petrobras to increase its April oil output target to 2.26 million b/d from 2.07 million b/d, with an accompanying increase in refinery capacity utilization, the company said in a revision included with Monday's production report.

Petrobras, however, warned it would continue to monitor market developments. "The uncertain environment reflects the fluid dynamics of the market that demands continuous monitoring, keeping in sight the optimal management of our production capacity," Petrobras said.

Brazil kicked off 2020 with expectations that improved economic activity featuring GDP growth estimated at 2.3% would lead to a fourth-consecutive year of higher refined product sales.GDP estimates, however, now call for Brazil's economy to contract 3.3% in 2020 because of the pandemic. Demand for diesel and gasoline, Brazil's two most widely consumed refined products, typically tracks GDP.

DIESEL DIVE

Diesel sales decreased as industrial and agricultural activity were undermined by seasonal factors to start the year, although the start of the sugarcane and oil seed harvest seasons in March offered some support, according to Petrobras. The company also started to shift some diesel streams toward low-sulfur bunker fuel output, creating more space for third-party importers and competing fuel distributors.

Brazil also boosted the volume of biodiesel blended with diesel sold at the pump to 12% from 11% on March 1.

Petrobras sold 610,000 b/d of diesel in Q1, a 12.6% year-on-year decline from 698,000 b/d in the year-ago quarter. Q1's sales also fell 12.5% from 697,000 b/d in Q4, Petrobras said.

Brazil's gasoline market suffered the biggest hit from social distancing measures, which dramatically reduced daily commuting and demand. Gasoline demand typically climbs in the first and final quarters of each year amid less competition from biofuel rival hydrous ethanol. Brazil was in the fallow period between sugarcane harvests during Q1.

Petrobras sold 330,000 b/d of gasoline in Q1, down 14.3% from 385,000 b/d in the year-ago period. Q1's sales were also off 13.8% from 383,000 b/d in Q4, Petrobras said.

Sales of LPG, naphtha and exported products such as gasoline, diesel and bunker fuel, meanwhile, rose year on year in a surprising development, Petrobras said.

LPG sales climbed 2.8% year on year in Q1 to the equivalent of 220,000 b/d, it said. Q1's sales, however, were down 3.1% from Q4, despite panic buying of the tanks used to power cooking stoves by consumers after social distancing measures were imposed in March.

Naphtha sales also advanced amid strong demand from petrochemicals producer Braskem and greater use in gasoline streams, Petrobras said. Petrobras sold 136,000 b/d of naphtha in Q1, up 49.5% year on year and 70.0% from Q4, it said.

Export sales also soared 55.3% year on year in Q1 to 1.031 million b/d, Petrobras said. That included a record 896,000 b/d of crude exports and a record 238,000 b/d of bunker fuel exports in February, Petrobras said.

Natural gas sales, however, dropped on replenished hydro-electric dam reservoirs and lackluster electricity demand, Petrobras said. Petrobras sold 72 million cu m/d in Q1, down 4.0% from Q1 2019 and 10.0% from Q4, it said.

Gas imports from neighboring Bolivia rose, while LNG imports remained stable on lower international prices that made such purchases more attractive than domestic output, Petrobras said. Gas imports climbed 11.1% year on year Q1 to 20 million cu m/d, but fell 23.1% compared with Q4, it said.

LNG imports, meanwhile, were stable year on year at 7 million cu m/d, Petrobras said. Q1 LNG imports, however, jumped 75% from 4 million cu m/d in Q4.