This year has been a lot of turmoil for the global energy market. The COVID-19 pandemic and the March 2020 price drop pushed the market into a tough spot, seeing the North American West Texas Intermediate oil price benchmark plunge into a negative zone for first in history. Events, together with the emergence of more stringent sulfur content for the fuel, has led to a shift away from the global oil industry and changed traditional price assumptions. The popularity of Sweet crude oil among Asian refineries are growing steadily at a steady rate. This is an important trend to understand as it creates a situation where a lot of heavy and extremely acidic debris, like those found in the oil sands of Canada and Venezuela, could become property trapped sooner than expected. It has also seen price differentials between sweet crude and international Brent crude hit an all-time high, with Asia̵7;s demand for sweet crude higher.
Malaysia’s Tapis grade crude oil, produced in the South China Sea near Peninsular Malaysia, has long been recognized worldwide the most expensive. Its lightness with an API gravity of 42.7 degrees and sweetness, indicates that Tapis possesses an extremely low sulfur content of 0.04%, making it highly desirable for refining into gasoline, diesel and assorted. other high-quality fuel. Tapis popularity appears to be waning as it currently trades at a 7% discount against Brent, instead of a premium. That could be explained by the growing demand from Asian refiners for other high quality crude oils. Earlier this year some surprise candidate Tapis cloak challenge is the world’s most expensive. In September 2020, Australian heavy sweet and crispy coffees Vincent and Van Gogh were trading at a premium for Tapis despite their 18.5 and 17 degrees heavier API heaviness and higher sulfur content. respectively 0.55% and 0.37%. This is Viktor Katona at Oilprice.com explainThis is due to their mixing utility and extremely low temperature points, minus 17 degrees and minus 15 degrees Celsius, respectively. The pour point is an important but often overlooked property of crude oils. This is the lowest temperature at which crude oil will flow under gravity when cooled, beyond which it becomes flexible and does not flow, making it impossible for crude oil to be stored or transported through pipes. The pour point represents the paraffin content of the crude oil mixture because of the larger paraffin volume create a higher one pour point. The high paraffin content is an undesirable property for refineries as it increases the difficulty and cost of crude oil processing. The extremely low freezing point of the Vincent and Van Gogh crude oils, and therefore the low paraffin content, further explains their increase in popularity. There are indications that Brazil’s two crude oils could take the throne as the most expensive crude in the world. Demand for Brazil’s Lula and Buzios crude oils, produced from the country’s offshore pre-salt oil fields, has skyrocketed since done IMO2020 in which the limit of sulfur content in marine fuel is 0.5% by weight. Both are medium grade sweet crude oils with API weights of 29 degrees and 28.4 degrees, and low sulfur content of 0.27 percent and 0.31 percent respectively. Lula and Buzios also possess a low pour point of about 9 degrees Celsius, showing low paraffin mass, which when combined with a low metal content makes them cheaper and easier to refine into gasoline, diesel and other High-quality fuels differ from many other crude blends.
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This explains the soaring demand for Lula and Buzios among Asian refineries, by the end of September 2020, Brazil had become third largest supplier of crude oil to China compared to sixth place in 2018. In September 2020, Brazil’s national oil company Petrobras reports record crude oil exports of just over 1 million barrels a day, with the majority of goods being shipped to China. Not only does the world’s second-largest economy extract Brazilian crude, demand from other countries such as the US, Spain, Portugal and the Netherlands has soared. Refiners in other Asian countries, notably India, have suggested that they want to increase imports of Brazil’s medium sweet crude oils. Brazil’s demand for medium sweet crude oil is sure and growing will drive higher oil prices. The difference between Lula and Brent has decreased significantly over the past year. Based on Oilprice.com data, Lula is trading at 4% higher than Brent or nearly $ 2 a barrel more expensive. Lula is selling at a price 8.5% higher to Tapis, about $ 3 a barrel higher. For the reasons discussed, it is likely that the price differential between Lula and Brent will intensify, especially if demand from Asia remains strong. The pricing for Buzios is harder to find, but according to Petrobras like Lula, it trades for more than Brent in China.
While the US has the largest refining capacity globally of any country, with a sizeable portion configured for cheaper heavy sour crude oils, the combined processing capacity of China, India India and other Asian countries outperform that North America by a considerable margin. Most of these refineries are designed to process lighter sweet crude, This means that demand for Brazil’s sweet crude oils will not only remain strong but will also continue to expand. This explains why Brazil’s salt money production continues to expand despite a decline in total crude oil production due to the economic inadequacy of salt, and shallow water and onshore wells were closed due to a difficult price environment. In September 2020, Brazil’s pre-salt oil production averaged 2,586,626 barrels per day, 13% higher than the same month a year earlier. This suggests that pre-salt crude oil production accounts for 70% of Brazil’s total hydrocarbon production compared with 61% a year earlier. The Tupi and Buzios fields, where the Lula and Buzios crude are pumped together, contribute 72% of Brazil’s pre-salt oil production.
Petrobras is the driving force behind the increasing production of pre-salted oil from its brine operations that pumped an average of 1.65 million barrels per day in the third quarter of 2020. This is nearly 21% larger than the same period. last year and accounted for 62% of Brazil’s total production before salt production. Brazil’s national oil company is investing heavily in the incremental operation of the Buzios field to increase production of the very popular, low-sulfur medium crude. Strong demand for Lula and Buzios oils, coupled with higher prices than Brent and expected recovery in 2021, will boost Brazil’s oil sales as well as Petrobras’ profits.
Editor’s note: Find Brazilian crude and 150 other global crude blends on Oilprice.com Oil price data page.
By Matthew Smith for Oilprice.com
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