At the end of July, political risks re-emerged in South America. In Venezuela, there was widespread political disruption in the run-up to the controversial referendum on an assembly charged with amending the country’s constitution. In Brazil, recurring corruption, accusations against numerous members of government and a stubborn recession have held back consumer sentiment and economic growth. And in Argentina, uncertainty over nationwide primary elections and whether former President Christina Fernandez de Kirchener would acquire a seat in the Senate (thereby granting her immunity from corruption charges and a venue to promote anti-investment populism) held foreign exchange markets in anticipation.
Navarik Data shows that over the combined region a disconnect developed in the overall refined product stock changes for PADD 3 and PADD 3 refined product exports to that region. Leading the charge was surely Venezuela, since the referendum occurred on the 30th of July and was preceded by weeks of unrest. We previously reported on cargoes waiting offshore, and these vessels are still waiting. A precipitous fall during this period appears to have settled, but at a lower level. Weaker imports into Brazil and Argentina have not been able to pick up the slack. Meanwhile, even though PADD 3 refined product stocks ballooned during the period that these exports fell they have continued to draw down despite these exports remaining low.
We expect that both trends will continue – Navarik’s proprietary forward data set of confirmed volumes suggest that South America-bound exports will be down marginally again. Likewise, our projection of EIA stock figures based on these confirmed volumes (including exports to other regions) suggests with some 60% certainty that there will be an estimated draw in the EIA figures for PADD 3. This would suggest that some of the other destination regions and/or higher domestic consumer demand may have picked up the slack.
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