OPEC gets another supply headache from Brazil
The nation’s growing oil production combined with slumping domestic demand has unleashed record exports, undermining OPEC’s efforts to reverse falling prices through output cuts.
Brazil hit a daily production record of 1.5 million barrels earlier this year, 26 percent more than the previous record set in 2010.
Average exports surged 39 percent in the first four months of 2017 from the previous year.
State-controlled Petroleo Brasileiro SA, the country’s dominant producer and the source of half its crude exports, expects to end 2017 with 30 percent growth in international sales.
As a result, Brazil is expected to be the second-biggest source of non- OPEC supply in the second half of the year, OPEC said in its June oil market report.
Though it’s still a distant second to the U.S., where the shale oil revolution continues to drive output growth despite the price crash.
“Brazil becoming a relevant exporter is complicating OPEC’s efforts to control prices through supply cuts,” former oil regulator Helder Queiroz, a scholar at Rio de Janeiro Federal University, said by phone.
The export growth helps the country strengthen its trade balance and provides some relief amid the nation’s worst recession in a century.
Producers are free to pump and export crude at will in Brazil, unlike OPEC countries where governments set output limits, according to Aurelio Amaral, a director at oil regulator ANP. ■