April 9 (Reuters) China imported a record volume of oil from Brazil in March, boosting Brazilian exports of the commodity to the second highest level in the historical series, amid a reorganization of global energy flows following disruptions in the Middle East.
The Asian country bought 1.6 million barrels per day (bpd) of Brazilian oil last month, the highest volume ever recorded and equivalent to 67% of all Brazilian exports, according to official data from the federal government. This amount surpassed the previous record of approximately 1.46 million bpd, registered in May 2020.
“The increase in exports was already expected, as the closure of the Strait of Hormuz resulted in an intense search by importing countries for products supplied by other origins, finding in the Brazilian market part of the supply lost in the Middle East,” stated Bruno Cordeiro, Market Intelligence Analyst at StoneX.
He noted, based on government data, that India was the second largest destination for Brazilian oil exports in March, accounting for 7% of shipments, with the Asian country also seeking alternatives to deal with the difficulties in crossing the Strait of Hormuz, through which, before the Iran war, about 20% of global commodity flows passed.
“This greater participation from Asia reflects the continent’s need to further diversify its suppliers, with Brazil benefiting from this scenario and exporting a larger volume of oil.”
Following China and India, Spain appears among the main destinations for Brazilian oil, with 6.7%, and the United States, with 6.1%, said Cordeiro.
Brazil’s total oil exports reached 2.5 million barrels per day (bpd) in March, a 12.4% increase over February and the second highest in history, behind only March 2023.
Cordeiro considered that the opening of the Strait of Hormuz, with the truce in the trade war announced the day before, should alleviate Asian pressure, which could result in less demand for Brazilian oil—given the geographical proximity and logistical benefits of this trade between the Persian Gulf countries and the continent.
“At the same time, the gradual resumption of flows through the Strait of Hormuz is a factor that should guarantee the maintenance of high sales volumes from Brazil to some consumers in the region, mainly China and India,” he added.
DIESEL
While oil exports increased, Brazil significantly reduced diesel imports, a warning sign for the country that imports about 25% of its needs.
According to data released by the Ministry of Development, Industry, Trade and Services, external purchases of fuel totaled 1.05 billion liters in March, a 25% decrease compared to February.
For Cordeiro, “the significant reduction in shipments destined for Brazil reflects both a substantial increase in competition for the product in the international market, and the rise in prices of imported product arriving at Brazilian ports.”
The reduction was felt mainly in shipments from the United States, the data showed. The share of US diesel in Brazilian imports fell to less than 1% in March, compared to 8.3% in the previous month.
According to the StoneX analyst, “the decrease in the North American market share likely reflects a redirection of diesel exports from the country to other regions that have been paying higher premiums for the fuel, mainly Asia — which has been feeling the impacts more from the suspension of fossil fuel flows through the Strait of Hormuz.”
Amid the lower North American supply, Russia expanded its presence in the Brazilian market, increasing its share from 58% in February to 75% in March, even with a similar volume of exports in February, according to Cordeiro.
“Despite the Ukrainian attacks against strategic western Russian ports in mid-March and a temporary reduction in fuel exports, the impacts of this lower supply are expected to be felt in shipments scheduled for April,” said Cordeiro.
Another highlight was the maintenance of the participation of Saudi Arabia and the United Arab Emirates, each accounting for approximately 130 million liters exported to Brazil in the month.
“This scenario reflects the greater impacts of the closure of the Strait of Hormuz for…” “The cargo expected for April, or the capacity to transport these products through the Red Sea,” the analyst stated.
For the coming months, the scenario remains surrounded by uncertainty.
“For April and May, uncertainties persist. The temporary ceasefire agreement between the US and Iran should alleviate this dispute over cargo in the international market in the very short term, with the Persian Gulf channeling a larger amount of products to other regions. Even so, the lack of a definitive resolution to the conflict could result in new blockades in the Strait of Hormuz, which would maintain a very stressed global balance,” said Cordeiro.
Brazil Energy Insight 
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