RIO DE JANEIRO (Reuters) - Brazilian state-run oil firm Petrobras has reversed most of its previously announced production cuts due to higher-than-expected demand for some fuels, it said on Monday, a surprising turnaround that may be tied to an aggressive bet on bunker fuel.
In a Monday securities filing with first-quarter production figures, Petroleo Brasileiro SA, as the firm is formally known, noted that it initially decided to cut April oil production to 2.07 million barrels per day (bpd).
But it said it decided later in the month to increase production to 2.26 million bpd. It also increased utilization rates at its refineries to 79% after cutting them to 60%.
The reversal suggests Petrobras is confident in demand for its production mix even as rival oil majors scale back and the Organization of the Petroleum Exporting Countries orchestrates deep cuts in the face of rock-bottom oil prices.
“With demand for our products proving better than expected, we opted to gradually return average production to around 2.26 million bpd in April, while also increasing utilization rates at refineries,” the company said.
In late March and early April, the firm had announced total cuts of 200,000 bpd. Oil production averaged 2.32 million bpd of oil in the first three months of the year.
While Petrobras did not say which fuels were most in demand in April, company executives have made a priority of producing bunker fuel, which is used by ships. First-quarter production of bunker and other fuel oils by Petrobras rose 18.5% from the previous quarter and almost 50% from the same period a year before.
New international regulations that came into force at the beginning of the year lowered the maximum allowed sulfur content of bunker fuels. Much of the oil produced by Petrobras is naturally low in sulfur, making it ideal for bunker production.
Executives have repeatedly said demand for bunker fuel appears more resilient during the novel coronavirus pandemic than demand for other products, such as gasoline and jet fuel.
Including natural gas and other petroleum products, Petrobras produced 2.909 million barrels of oil equivalent per day in the first quarter, down 3.8% from the previous quarter and up 14.6% from the same period a year before.
The firm said its results were helped by various platforms coming online and negatively impacted by a number of scheduled stoppages.
Petrobras added that it was maintaining its guidance for 2020 oil production, which it divulged in November.
Reporting by Gram Slattery; Additional reporting by Roberto Samora in Sao Paulo; Editing by Sandra Maler, Lisa Shumaker and Sonya Hepinstall