- OPEC’s supply cuts have proven effective, with Brent prices now holding around $70/barrel;
- This is positive for hydrous prices as gasoline ex-refinery values are readjusted to follow the international trend;
- Furthermore, adverse weather and increase in distributors interest is expected to offer support for ethanol prices at the start of the season;
Brent prices holding
Brent Oil Prices (USD/barrel)
- OPEC’s supply cuts, reduction from Iranian outflow and the crisis in Venezuela have reduced world’s oil supply;
- The cartel has even come forward to say that the oil market is now in deficit;
- The meeting schedule for this April was cancelled and should now take place in May or/and June, when OPEC will revise supply cuts;
- The environment for oil prices seems more constructive and values are holding well into USD70/barrel;
- Higher oil prices means higher gasoline levels which in turn is positive for hydrous ethanol prices in Brazil;
Positive variables
- Adverse weather this week has hindered operations from the mills that have already started the season;
- Around 2 days of operations have been lost this 1H of April;
- This diminished supply at the start of the season, thus proving support for hydrous prices;
CS Daily Rains (mm)
- Contrary to the end of March, we have been seeing a renewed interest from distributors this week, looking to be more active in the market;
- Demand has sustained close to record levels as parity at the pumps and gasoline prices over BRL4/litre (SP) have kept consumers preference turned towards the biofuel;
Hydrous ex-mill Prices (BRL/litre)
- The combination of high gasoline prices, adverse weather and steady demand is expected to offer support for hydrous prices at the start of the new 2019/20 season;
Reflection in gasoline
Brazil ex-refinery gasoline
- Brazil gasoline price policy is to follow international prices;
- With Brent recovery, gasoline values have been adjusted higher since February – close to levels seen in October last year;
- The higher gasoline prices, the higher hydrous values can climb without losing competitiveness at the pumps;
- This limits the downside for hydrous values;