Crude supply from Latin America is set to rise this year, raising questions about where the extra flows will go, given the multiple uncertainties that the markets are facing around tariffs, sanctions and maritime security.
The big drivers of this additional supply will be Brazil, Guyana and Argentina, which are together expected to deliver an extra 400,000 b/d of mainly light and medium sweet crudes to world markets this year, according to the latest IEA projections. Brazil is expected to produce 220,000 b/d more crude this year as several new floating production storage and offloading vessels come on line. These include two at the Buzios complex that will add 405,000 b/d of capacity, and another at the Mero field adding 180,000 b/d — both fields produce middle distillate-rich medium sweet grades popular with buyers in Europe.
Guyana, the most eye-catching oil development story of the past decade, produced just over 615,000 b/d last year, and output will increase again this year as the 250,000 b/d Yellowtail project ramps up. In Argentina, the oil sector is expected to benefit from the expansion of storage and loading facilities at the key port of Puerto Rosales, which will allow the docking of heavier Suezmax tankers and create scope for increased exports of light sweet Medanito from the Vaca Muerta shale formation.
The big question for these producers is how and where they can market these exports, given the myriad uncertainties being caused by geopolitics. Tighter US sanctions on Russian exports are lifting premiums for non-sanctioned crude, boosting interest in recent weeks for Brazilian and Guyanese grades.
But the White House's threatened trade tariffs on Canada and Mexico could also leave US refiners seeking replacements, while diverting Canadian and Mexican shipments elsewhere. Lower risks to shipping in the Red Sea could boost Mideast Gulf flows to Europe, increasing competition there, but this could open up sales opportunities in Asia-Pacific, as could tighter US sanctions restricting Iranian oil sales to China.
The upshot of all this is that some of these Latin American grades are likely to find increased interest from existing and some new customers. Brazil, Guyana and Argentinian sweet crudes do not offer a like-for-like substitute for mainly heavy sour Mexican and Canadian grades — Colombia or Ecuador could provide a closer match. But they could hold some appeal as a short-haul option for US refiners needing to rethink their crude buying — Guyana and Argentina, for example, already export some oil to the US west coast.
Going for Unity Gold
There could also be interest from new markets in Asia and west Africa — India's BPCL bought its first cargo of Medanito in December, while Nigeria's huge new Dangote refinery could be another outlet. The refinery is likely to face competition for domestic Nigerian grades from the country's newly renovated Port Harcourt and Warri refineries, and this month closed a tender that included Brazilian and Guyanese options for the first time.
Brazil and Guyana have already established robust exports to Europe — the region took two-thirds of Guyana's shipments last year — while Brazil is a big supplier to India and especially China. Guyana could also come into play as another "non-sanctioned" option for Chinese and Indian buyers scaling back Russian crude purchases because of US sanctions. China has not imported any Guyanese crude for several years, shiptracking data indicate, but India is starting to show interest, as indicated by state-owned IOC's tender earlier this month, which listed Guyana's Payara Gold, Unity Gold and Liza among the eligible grades.
