Mexico's state-owned oil company plans to stop some crude oil exports in the coming months, a move that will further reduce supply on the global market.
Petroleos Mexicanos, also known as Pemex, has canceled contracts to supply its flagship Maya crude oil to U.S., European and Asian refineries, according to people familiar with the matter.
Mexico's export cuts could further push up oil prices, which are already at a six-month high, as OPEC+ extends production cuts.
Venezuela's exports will also fall as the United States reimposes sanctions on Venezuela's oil industry, and spot supplies, especially heavy sour oils such as Maya crude, are tightening further. JPMorgan warned last week that global benchmark Brent crude could hit $100 a barrel this year.
People familiar with the matter said Pemex’s plan to suspend some exports is to increase domestic gasoline and diesel production before the June 2 presidential election. Current President Lopez Obrador, whose term is coming to an end, has pledged to wean the country off expensive imported fuel. His years-long efforts to reform Mexico's refining industry are finally starting to bear fruit.
In February, operating rates at the country's six refineries were close to their highest levels in more than six years. Crude oil usage should continue to rise as Pemex launches commercial operations at its new Olmeca refinery. The refinery, also known as Dos Bocas, has a daily crude oil processing capacity of 340,000 barrels.
People familiar with the matter said that the plan to suspend some exports mainly affects the export of Maya crude oil, while exports of other grades including the medium-sour Isthmus should also continue to be reduced. It is unclear whether Pemex's trading arm PMI will be able to continue cutting exports. In 2021 and 2023, due to the failure of domestic refining capacity to increase, the company had to shelve its plan to suspend crude oil exports.
Maya crude oil export destinations in 2023
The prospect of reduced supplies from Mexico, the largest crude supplier to the U.S. Gulf Coast, is supporting prices for medium-sour Mars Blend crude produced in the Gulf of Mexico. Mars crude oil traded at a $1.60 per barrel premium to futures on Monday, the highest premium since November, according to preliminary data from pricing agency General Index. Supply has been tight at the key storage center in Cushing, Oklahoma, pushing up recent crude prices. The so-called WTI cash roll, the price for prompt delivery at Cushing, was trading at a premium of $1.50 a barrel on Monday, the highest level since early March, according to traders.
U.S. refiners are likely to bear the brunt of the impact of reduced Maya crude exports. Fuel makers including Valero Energy Inc, Chevron Corp and Marathon Petroleum Corp import 420,000 barrels per day of heavy sour crude. Maya crude exports are expected to reach 612,000 barrels per day in 2023.
Pemex said last week that its crude oil production averaged 1.55 million barrels per day in February, the lowest level since 1979 and well short of the 1.9 million barrels per day target set by President Lopez. The debt-laden driller's output has gradually declined from a peak of 3.4 million barrels per day two decades ago as many aging fields near the end of their productive life and new discoveries cannot make up for it. Lopez pledged during his 2018 campaign to increase crude production to 3 million barrels per day, an estimate he has since gradually revised downwards.
Meanwhile, crude oil processing volumes at Pemex's six local refineries increased 17% year-on-year in February. The refineries produced 371,000 barrels of gasoline and 113,000 barrels of diesel per day in the first two months of this year.
The article is forwarded from: Jinshi Data