Mexico could draw more gasoline, diesel: Update

Adds details on waterborne import fixtures.

Mexico's gasoline and diesel imports may continue to rise beyond the 22pc increase seen in mid-July, supported by lower freight costs and domestic refinery problems, initial data indicates.

Mexico's gasoline imports reached 493,000 b/d in the week ended 17 July, growing by 22pc from the 385,000 b/d seen the week before, according to preliminary data from Mexico's energy ministry (Sener).

This is the highest gasoline import level in 15 weeks, and the first time above 450,000 b/d in that same period. But this is still 25pc less than the first quarter's import average of 600,000 b/d of gasoline — before the Mexican government ordered more strict measures to limit the spread of the Covid-19 pandemic.

Diesel imports grew by 19pc to 192,000 b/d, from 156,000 b/d in the prior week. This is diesel's highest import level in nine weeks. Mid-July diesel imports are still 21pc less than the first quarter average of 293,000 b/d.

Exports of finished gasoline from the US to all countries rose by 56pc in the week ended 7 August from the prior week, and ultra-low sulphur diesel (ULSD) exports rose by 13pc in the same period, data from the US Energy Information Administration (EIA) show.Mexico is the US' biggest importer of refined products.

US exports to destinations other than Mexico were thin in early August, pushing freight rates lower as cargo demand lagged.

Non-Pemex firms chartered more tankers than usual on the route in the past week, suggesting that some of the imports are already on their way.

Among other charterers, Koch booked the Ugale for a US Gulf coast-east coast Mexico voyage today and the Nave Orbit last week for prompt loading.

Private-sector importers for some time have been gaining a larger share of the market, despite the Mexican government's drive to maintain state primacy.

MTBE tags along

This surge in Mexican imports might also increase demand for oxygenates, mostly MTBE.

"Mexico is importing a lot of gasoline, and there is substantial demand for MTBE for Mexico, it is so cheap," one trader told Argus. "Their refineries are on the fritz, [I am] thinking it is Covid-related."

Argus assessed US MTBE in the mid 110¢/USG range on 13 August, down from a three month-high on 23 June at 135¢/USG. But more importantly, MTBE is cheaper relative to the front-month gasoline futures contract off of which it prices, trading at a 7¢/USG discount to September RBOB. Typically MTBE is at a premium to RBOB.

Nearly two-thirds of US-produced MTBE finds a home in Mexico. While Pemex does produce MTBE in small amounts, persistent refinery issues and a growing appetite for the oxygenate have increased reliance on MTBE imports, especially from the US Gulf coast.

The 330,000 b/d Salina Cruz refinery was shut after a 7.4-magnitude earthquake in June. It was scheduled to restart in the first week of August, but the government has not confirmed this.

The 315,000 b/d Tula refinery processed no crude in mid-July as excess fuel oil has filled its storage tanks. The 275,000 b/d Cadereyta refinery has been the focus on pollution complaints from residents and environmental regulators are carrying out additional inspections.

Pandemic production

Pemex's workers are also complaining that safety measures at their installations against the virus are not enough. Protests and a high number of ill workers could increase import demand by further slowing domestic production that already fell in mid-July to near the low for this year, despite a government drive to increase it.

Pemex has confirmed 6,309 cases of Covid-19 among its current and retired workers and their immediate family members as of 13 August, but it has stopped breaking out the tally for only its active workers.

An undetermined number of workers at the Salina Cruz refinery began a strike at the plant on 4 August to demand better conditions and protection against the Covid-19 pandemic.

There have been intermittent, smaller protests across Pemex's facilities nationwide in Veracruz, Tampico and Oaxaca, but they have not affected operations.

The petroleum workers' union (STPRM), which groups most of Pemex's roughly 100,000 workers, recently published a letter asking for better protocols to stop the spread of the virus.

By Sergio Meana and Steven McGinn