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In my previous posts here and here, I have recommended investing in oil with a long-term perspective. One of the main reasons for my recommendation was the impressive growth in the demand for crude oil from developing countries, including China, India, South Korea, Brazil and others. But in order to find out if now is the time to invest in oil, it is important also to analyze the fundamental parameters of this important resource-its production, consumption and reserves in Brazil, the sixth biggest world economy.

Brazil's population is about 2.8% of the world population, but according to the BP Statistical Review of World Energy 2012, released on June 26, 2012, Brazil consumed 3.0% of the world total oil consumption in 2011. Brazil's oil consumption 2.653 million barrels/day in 2011, ranked seventh in the world in 2011. But while the world's oil consumption increased 0.7% in 2011, Brazil's consumption increased by 2.3%.

Brazil's Oil Production

Total Brazil's oil production rose from 96,000 barrels per day in 1965 to 2.193 million barrels per day in 2011, Compound Annual Growth Rate - CAGR : 7.04%. This production data includes crude oil, shale oil, oil sands and NGLs, and excludes liquid fuels from other sources, such as biomass and coal derivatives.


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Data: BP Statistical Review of World Energy 2012

Brazil's Oil Consumption

Total Brazil's oil consumption rose from 307,000 barrels per day in 1965 to 2.653 million barrels per day in 2011, Compound Annual Growth Rate - CAGR : 4.80%. This consumption data includes inland demand plus international aviation and marine bunkers and refinery fuel and loss. Consumption of fuel ethanol and biodiesel is also included.

We can see that in the long term Brazil's oil production is rising at a much higher rate than its consumption, due to the revolutionary deep water huge discoveries. Nevertheless Brazil consumption is still greater than its production. The difference between consumption and production, which must be fulfilled by import, decreased from 1.131 million barrels per day in 1997 to 460,000 barrels per day in 2011.


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Data: BP Statistical Review of World Energy 2012


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Data: BP Statistical Review of World Energy 2012

Brazil's Proved Oil Reserves

Total Brazil's proved oil reserves rose from 1.32 billion barrels in 1980 to 15.05 billion barrels in 2011, Compound Annual Growth Rate - CAGR : 8.17%. Brazil's proved reserves ranked 14th in the world and are equivalent to 15.5 years of Brazil's consumption in 2011 rate.


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Data: BP Statistical Review of World Energy 2012

Brazil Oil Demand in 2012

According to the International Energy Agency, Oil Market Report, released on June 13, 2012:

"In Brazil, product demand expanded by 5.0% year‐on‐year in March, following a 2.1% increase in February. Product growth was led by gasoil/diesel (9.7%), jet/kerosene (8.2%) and motor gasoline (5.1%), while residual fuel dropped by 2.4%. Support for gasoil demand in March came from the start of the sugarcane, corn and soy harvest seasons. Jet fuel/kerosene demand is supported by strong growth in domestic aviation. Industry indicators from March showed that 'available seat kilometres' grew by 7.0% annually. However, the sector is slowing down as 'revenue passenger kilometres' grew only 1.3%. Motor gasoline demand accelerated as a result of lower prices of hydrous ethanol and strong seasonal demand.Refined gasoline continues to be competitive and the fuel of choice, but biofuel demand should pick up when ethanol stocks are replenished by the 2012/2013 sugarcane harvest. Brazil's total oil product demand is forecast at 2.8 mb/d in 2012, up 2.1% on the year earlier."

Conclusion

Since Brazil's oil demand is forecast at 2.8 barrels per day in 2012, up 2.1% on the year earlier, and considering that consumption of other developing countries like, China, India, South Korea, Brazil and others, is growing at a very high rate, while supply growth is limited, all that could cause shortages and a higher price of oil.

Some Liquid ETFS for Oil:

  • United States Oil Fund LP (USO)
  • ProShares Ultra DJ-AIG Crude Oil ETF (UCO)
  • iPath S&P GSCI Crude Oil Total Return (OIL)
  • PowerShares DB Oil Fund (DBO)
  • United States Brent Oil (BNO)
Source: Brazil's Oil Revolution