The main destination for Petrobras' oil exports, China has been showing signs of recovery in crude oil consumption. According to consultancy Wood Mackenzie, Chinese demand for the commodity is expected to rise 16.3% in the second quarter, compared to the first three months of the year, a period in which the Asian country plunged into an economic crisis triggered by social isolation measures, against the new coronavirus.

Chinese consumption is expected to return to levels of 13 million barrels / day, but still remain 2.5% below the levels of the second quarter of 2019. The most effective recovery is expected only for the second half. Wood Mackenzie forecasts a 2.3% growth in demand from the Asian country in the second half of 2020, compared to the same period last year, to 13.6 million barrels.

China accounted, in the first quarter, for 48% of Petrobras exports, 20 percentage points less than the Chinese participation in the foreign sales of the Brazilian state-owned company in the fourth quarter of 2019. There was a 12% reduction in exports of the oil company to the Asian country on the same basis of comparison, to 386 thousand barrels per day.

The state company does not inform the revenues obtained from exports. According to foreign trade data from the Ministry of Economy, Brazilian shipments to China totaled, in the first quarter, US $ 3.33 billion, a decrease of 5.4% compared to the same period last year. The amount, however, corresponds to sales of all crude oil produced in Brazil, not only by the state company.

Despite the drop in exports to China, Petrobras was able to offset the effects of the economic crisis in the Asian country and increase sales to other countries. The highlight, in this sense, was India, which increased the purchases of the Brazilian state-owned company by about 45 thousand daily barrels between the last quarter of 2019 and the first three months of this year, to approximately 65 thousand daily barrels, on average. Spain, Singapore and South Korea, in turn, increased Petrobras' imports by 40,000 barrels per day each.

In the first three months of 2020, the state company sold abroad, on average, 806 thousand barrels per day, an increase of 63.15% in relation to the same period in 2019. In April, when the fall in demand was accentuated, the the company broke a record for the export of crude oil: 1 million barrels - the expectation for May, however, is that this volume will fall, as the domestic market recovers.

Petrobras' positive export data, in full contraction in global demand, show that the state's oil has been competitive in the market. Pre-salt oil has a low sulfur content, a specification whose demand grew after the new global specification for marine fuels came into force this year (IMO 2020).

For Wood Mackenzie, the path of recovery in Chinese demand will depend on how the pandemic will behave.

"Even if China avoids a second wave of infections, as long as the pandemic remains worldwide, the country will maintain strict border controls, restricting aviation. In addition, the current global economic crisis is likely to have an adverse impact on exports and investments. from China, putting negative pressure on the industrial and commercial transport activity ", says researcher Yuwei Pei, in a report on the subject.

The consultancy estimates that demand for gasoline is recovering rapidly and is likely to return to last year's levels in June. "More people are returning to the office after a telecommuting period. In addition, the use of private cars is now seen as the safest mode of mobility, transferring public transport passengers to private cars," comments Yuwei Pei.

Chinese demand for diesel, in turn, is expected to reach 3.4 million barrels a day in the second quarter of 2020, 3% less than recorded in the same period last year. The expectation, however, is that the consumption of the derivative will increase 1.2% in the third quarter, in the annual comparison. Aviation fuel consumption will continue to fall for the rest of the year.