Venezuela Shrinks Latin America’s Surplus

In 2019, Latin America’s regional crude surplus should average 3.4 million b/d, down 400,000 b/d from 3.8 million b/d in 2017. Over the two years, production will fall by 380,000 b/d, led by the collapse in Venezuela. Meanwhile, regional refinery throughput will rise by 20,000 b/d. Free of the weight of Venezuela, the non-OPEC Latin America balance would rise by 250,000 b/d in the same period.

Distillate Imports to Surge in Second Half of 2018

Despite a growing deficit, in the first half of 2018 European distillate imports remained flat year-on-year at roughly 1.6 million b/d. With regional distillate inventories depleted and the distillate deficit slated to keep expanding, European distillate imports will rise by about 240,000 b/d in the second half of this year and provide bullish support for global markets.

AMLO Price-Freeze Supports Gasoline Demand

President-elect Lopez Obrador’s promise to freeze gasoline prices will support gasoline demand, which is on track to grow by 15,000 b/d this year. An increase in refinery throughput will more than offset the impact on Mexico’s imports though. We expect a modest increase in utilization rates in the second half of the year, increasing gasoline supply by 60,000 b/d compared to the first half of 2018 and reducing Mexico’s import requirement by 40,000 b/d.

Subsidy Helps Petrobas Raise Runs

Aggressive fuel price increases caused Brazil’s truckers to strike in May. The resulting government subsidy to smooth out diesel prices for consumers will help Petrobras raise runs and avoid sacrificing market share to importers. At the same time, demand is expected to grow by 20,000 b/d to 960,000 b/d. ESAI Energy expects Brazil’s diesel import requirement to remain flat in the second half of 2018 at 210,000 b/d.