Page 9 - EurOil Week 20 2022

EurOil COMMENTARY EurOil

This stance is understandable from a polit- Asia
ical perspective, but the truckers have threat- Across the Pacific, lockdowns in China have
ened to stage a national strike and mount road offered something of a reprieve to diesel and jet
blockades on May 21 to express their discon- fuel markets, dampening demand at a time when
tent. If these protest actions continue beyond the war in Ukraine and sanctions on Russia have
May 21, they have the potential to wreak great caused jet fuel prices to spike. However, there
havoc on the Brazilian economy, which is still have been warnings that as Chinese lockdowns
working to recover from the ravages of the eventually ease and demand rebounds, Russian
pandemic. This is not a theoretical matter, as supply will decline further and prices can be
it has happened before. Many Brazilian voters expected to rise higher still.
still have vivid memories of the 10-day truck- The surge in jet fuel prices – up more than
ers’ strike in 2018 that ended up paralysing the 50% so far this year – has come as more and
country for weeks. more Asian countries are lifting pandemic-re-
Bolsonaro, of course, is taking the truckers’ lated travel restrictions. It threatens to under-
side – and taking Petrobras to task for raising mine the impact of this reopening for airlines.
prices, even though the company is not required There are some bright spots, such as new
to take the government’s policy considerations in refining capacity coming online in Asia fol-
mind when setting tariffs. He has also replaced lowing delays that have been attributed to the
the state-owned company’s CEO and appointed pandemic and to weak refining margins. The
a new cabinet member to head the governement situation has now changed, with Asian refiners
department following the resignation of Mines reported to be reaping record profits in recent
and Energy Minister Bento Albuquerque. Addi- weeks as the region also ramped up exports to
tionally, Albuquerque’s successor Adolfo Sach- Europe in a bid to help replace a shortfall of Rus-
sida has started talking about the possibility of sian fuel.
privatising Petrobras – apparently because the However, with many refiners (at least outside
president is tired of being blamed for its unpopu- China) already running at full capacity, there is
lar decisions and not just because a sell-off might limited potential to ramp up fuel production as
improve its performance. demand continues to rise. China is an exception
These developments all but guarantee that as lockdowns there persist. Refinery through-
Petrobras’ fate and pricing will be part of the put in the country was down 11% year on year
discussion in the run-up to Brazil’s presidential in April and had fallen to its lowest level since
election. The discussion is likely to be spirited, as March 2020. Chinese refinery output can thus
Bolsonaro, a right-wing populist who has moved be anticipated to rise as lockdowns in that coun-
away from his earlier statements in favour of try ease – but so too can the country’s domestic
market economics, is running against leftist fuel demand, and thus the potential to ease the
candidate Luiz Inacio da Silva. looming fuel supply crunch remains limited.™

Week 20 19•May•2022 www. NEWSBASE .com P9