(MENAFN- The Peninsula) Bloomberg
Rio de Janeiro: Brazil's most crippling recession on record is complicating life for Opec.
The nation's growing oil production combined with slumping domestic demand has unleashed record exports, undermining Opec's efforts to reverse falling prices through output cuts.
Brazil hit a daily production record of 1.5 million barrels earlier this year, 26 percent more than the previous record set in 2010. Average exports surged 39 percent in the first four months of 2017 from the previous year. State-controlled Petroleo Brasileiro SA, the country's dominant producer and the source of half its crude exports, expects to end 2017 with 30 percent growth in international sales.
As a result, Brazil is expected to be the second-biggest source of non- Opec supply in the second half of the year, Opec said in its June oil market report. Though it's still a distant second to the US, where the shale oil revolution continues to drive output growth despite the price crash.
'Brazil becoming a relevant exporter is complicating Opec's efforts to control prices through supply cuts, former oil regulator Helder Queiroz, a scholar at Rio de Janeiro Federal University, said by phone.
The export growth helps the country strengthen its trade balance and provides some relief amid the nation's worst recession in a century. Producers are free to pump and export crude at will in Brazil, unlike Opec countries where governments set output limits, according to Aurelio Amaral, a director at oil regulator ANP.
'This is up for the companies to decide; the market is not regulated, Amaral said in an interview.
Recession is part of the explanation, as lower fuel consumption frees oil for exports. Crude demand resumed a declining trend in Brazil during April, shedding 130,000 barrels a day, or around 5.7 percent of total consumption.
'Lower fuel sales in the domestic market decreases the need to process oil in local refineries, Petrobras said in an emailed comment.
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