WoodMac: Brazil, Norway oil to alter markets

May 12, 2015
An estimated 3.8 million b/d of new supply by 2025 of heavy, sweet crude from large developments offshore Brazil and Norway will help European refiners, says Wood Mackenzie.

An estimated 3.8 million b/d of new supply by 2025 of heavy, sweet crude from large developments offshore Brazil and Norway will help European refiners, says Wood Mackenzie.

Large fields due on stream in Brazil’s presalt play will produce 3.2 million b/d by 2025, the firm predicts. That will be 78% of the country’s total output. Brazilian refining capacity of no more than 2.5 million b/d in 2025 will leave as much as 1.8 million b/d of crude available for export.

Of that, more than 1 million b/d of presalt crude will flow to Asia, according to WoodMac. Crowded out of the US Gulf Coast by new North American supply, remaining Brazilian presalt crude also will meet competition in Europe from crude produced by Norway’s Johan Sverdrup field, which will dominate North Sea production after 2020.

WoodMac says heavy crude supply in Northwest Europe will exceed 1 million b/d when Johan Sverdrup output peaks in 2024. But demand for heavy grades will stay close to the current 600,000 b/d.

WoodMac analysts expect Brazilian presalt and Johan Sverdrup crudes to trade at 3-4% discounts to lighter Brent crude. When European supply of heavy crude peaks, the discounts of heavy and medium crudes to Brent will widen further, to the benefit of complex refineries in the region.

The pattern will lower the attractiveness of Atlantic Basin markets for Urals and medium Middle Eastern crudes, which could then shift toward eastern markets.