Latin American oil markets are currently facing a unique dilemma. On one hand crude exports are impacted by upstream issues combined with slowing demand and pricing pressures in key markets. While on the other hand, clean product imports remain healthy driven by refinery maintenance, agricultural demand in Brazil and refinery outages in Mexico. In this insight, we will explore the impact of these various factors.
LatAm East Coast crude exports affected by upstream issues
Seaborne crude exports out of LatAm East Coast have fallen by 700kbd in July (days 1-22), a decline of 17% m-o-m. The main drivers of this decline are crude production problems impacting key producers, principally Brazil and Guyana.
If we look closely at Brazil, we have observed a continuous decline in exports since March of this year with some recovery in June, however preliminary data for July (days 1-22) suggests a drop of 330 kbd m-o-m. This drop can likely be attributed to upstream production issues as well as oilfield worker strikes. Additional information regarding this remains scarce.
Guyana on the other hand carried out maintenance at their offshore production platforms leading to a decline of 210kbd in July (days 1-22) vs June. According to their August and September loading programs, exports are expected to reach 700kbd in September (Bloomberg). From a freight perspective, this should bode well for Suezmax vessels since the Guyanese government recently announced restrictions on VLCC loadings. At the same time, Guyanese exports may see headwinds in the short term due to dampening demand from Europe driven by the weakening of Guyanese crude differentials against dated Brent.
LatAm West Coast crude exports rebound
If we look at LatAm West Coast, we can see crude exports have recovered by 56% m-o-m according to preliminary data for July (days 1-22). This increase is mainly driven by resumption of production in Ecuador which had declared force majeure in June following a pipeline outage (Argus). This pipeline outage was resolved early July leading to normalization of exports.
Another important development in the region which could favor Ecuadorian barrels in August is the approval from US regulators that India’s Reliance can import Venezuelan crude. This move is likely to divert some Venezuelan barrels from China towards India while China looks towards other heavy crude suppliers in LatAm such as Ecuador. Mexico West Coast exports have also recovered as South Korean refiners bought 90kbd of Zapoteco and Maya crudes.
Product imports remain healthy but for how long?
From crude we now move to products where Latin American imports have remained strong and above 2023 levels since April 2024 and even reaching seasonal highs in June.
Preliminary data for July (days 1-22) imports suggests an 8% increase y-o-y. A substantial driver for this import demand is agricultural demand in Brazil paired with refinery maintenance as well lower runs driven by less crude availability to run in the refining system due to upstream production issues.
Mexico, the second largest import market in LatAm, has been reeling under constant refinery outages and low refinery runs, having to resort to product imports to meet demand. Finally, July also observed increased imports from Chile and Argentina offsetting declines from other countries in the region.
The strength in clean product imports into LatAm are likely to slow down in the longer term given the eventual start up of the Olmeca/Dos Bocas refinery (340kbd) on the East Coast of Mexico. However in the short term, as refinery runs continue to struggle in the region and the USGC remains oversupplied, import demand is likely to stay healthy.
