Brazil diesel sales rebound on subsidy

Diesel sales in Brazil jumped to around 1.053mn b/d in June, the first sign of renewed demand after the government adopted a R0.46/l ($0.12/l) price subsidy to end a truckers' strike at the end of May.

June sales were around 7.4pc higher than a year earlier, and represented a 33pc jump over May, when supplies were sapped by the nationwide strike. The June sales volume was the highest since October 2015, according to data from oil regulator ANP.

Part of the demand was met by around 786,000 b/d in domestic production, up slightly compared with May and up 13pc year on year. The remainder came from imports, including stocks left over from the previous month.

On 27 May, in the middle of the strike that disrupted fuel and food supplies, embattled president Michel Temer announced the subsidy, composed of a R0.16/l reduction in federal fuel taxes and a R0.30/l direct subsidy.

The ANP this morning issued a decree extending the subsidy program through 31 December, subject to monthly price revisions. The program is expected to cost the government around R9.5bn by year-end, according to finance ministry estimates.

Last month, ANP approved initial total payments of R6,366 for Dax Oil and R114,943 for Riograndense, two of Brazil's three independent refiners, for the first 27 May-7 June phase of the program. The companies are among seven that requested payment for the first phase. Dozens of companies, including importers, participated in the second 8 June-31 July phase.

Tiny Dax Oil produced around 200 b/d of diesel in June, almost double the volume produced in June 2017. Riograndense produced 6,809 b/d in June, a 3.5pc year-on-year increase and up 51pc compared with May.

State-controlled Petrobras, which holds a virtual monopoly on the refining sector, produced 778,952 b/d of diesel at its 14 domestic refineries averaged in June, a less than 1pc increase over May but up 13pc year on year.

Appetite for government-subsidized fuel is expected to lead to steady increases in Petrobras' refining runs in the second half of the year, further eroding crude exports.

Crude exports from the country averaged around 667,000 b/d in June, down almost 22pc compared with May, and down 58pc from 12 months earlier.