Central Mexico fuel supplies closer to normal

Regular fuel deliveries have resumed in central Mexico to about 85pc of the 1,000 retail fuel stations hit with shortages close to the high-demand New Year's holiday earlier this week, state-owned Pemex said.

Work to fully restore normal supplies in Michoacan and Guanajuato states is still underway, the company told Argus.

Despite Pemex reporting nearly 1,000 stations experiencing delays, Mexican President Andres Manuel Lopez Obrador said yesterday that only about 70 retail fuel stations had run out of fuel.

"The problem was basically in Michoacan, but we expect it will normalize in the next few days," Lopez Obrador said. "We are analyzing the reasons, but mainly it had to do with the distribution system. Now trucks are being used more than pipelines."

The new administration ordered a review of the fuel supply chain to diagnose issues that might be affecting the market, including growing fuel theft, Mexico's biggest retail fuel association (Onexpo) said. The review of pipeline operations requested by the administration reduced flow and pressure, leading to the shortage.

Lopez Obrador last week launched a new effort to tackle a growing fuel theft problem, by using the army to guard Pemex's facilities and pipelines. Fuel theft losses were estimated at Ps66.3bn ($3.3bn) in 2018 by the administration that took office on 1 December, more than the $1.7bn tally by the past administration.

Mexico's fuel market is still mainly supplied by Pemex. Mexico only has enough storage capacity for about three days' worth of demand.

"In some regions, including the biggest [fuel] market in the central region, inventories can only be hours" worth of demand, according to a white book prepared by the previous energy ministry for Lopez Obrador's transition team.

Efforts to have an independent fuel supply from private companies are small but growing. Private companies imported 35,000 b/d of gasoline in October, or 5pc of the country's total 707,000 b/d of imports. Although it is still a small proportion of the total, private imports have grown from only 5,000 b/d in October 2017.

Private diesel imports are higher, representing 20pc of the total imports or 69,200 b/d out of 354,100 b/d. Yet more private imports are also dependent on growth in transportation and storage infrastructure.