Increasingly Cluttered Clean Product Glut Builds off Mexico

Increasingly Cluttered Clean Product Glut Builds off Mexico image

Increasingly Cluttered Clean Product Glut Builds off Mexico

04/27/2020 | Author: Amir Richani

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Lower demand for refined products, sparked by quarantine measures and limited onshore storage capacity are leading to a glut building offshore several Mexican ports. Some vessels are waiting for more than a week to offload. Based on information from Onexpo, Mexico’s petrol station association, the demand for refined products in Mexico has decreased by more than 50%, and could drop as much as 80%.

Meanwhile, Mexico has begun phase 3 of its efforts to reduce the spread of the coronavirus, which will further restrict the movement of people, further crimping demand for petroleum products. Mexico has identified more than 14,000 Covid-19 cases, according to the Johns Hopkins website. The pandemic has also affected Pemex workers with 182 infected and 1,494 possible cases, according to information released by the company.

Rising volumes building up offshore – very similar to port delays in January and February 2019 – are now evident across Mexico. In the Atlantic ports of Pajaritos, Tuxpan, Tampico and Veracruz, some 32 vessels carrying refined products were awaiting to discharge their cargoes in recent days. Meanwhile, at the Pacific ports of Mazatlan, Manzanillo and Lazaro Cardenas, another 17 ships are loaded and waiting to discharge. Most of the volume waiting has come from the United States, Mexico’s main supplier, but we are also seeing cargoes from China and the Netherlands.

Mexican imports of gasoline so far in April are the lowest monthly pace since April 2017. This is the result of demand destruction sparked by quarantines and port bottlenecks.

President Andres Manuel Lopez Obrador has announced an impending increase in refinery runs to about 800,000 barrels per day in April, though that seems rather ambitious, given runs have not been that strong since June 2017. Low demand for petroleum products and low refinery runs for February, based on the latest available numbers from the energy ministry, make it very unlikely for Pemex to almost double refinery runs as the president has suggested. Additionally, Pemex’s oil output and our crude export pace for the month of April suggest that Mexico is exporting too much crude to be sending 800,000 bpd to the country’s six refineries.

 

Finally, according to market reports, Pemex has declared force majeure on fuel imports from its trading arm. This points to the saturation of clean products in the Mexican market, further reducing the possibility of refineries running harder at this time.


About The Author

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Amir Richani is a geopolitical analyst focused on Latin America. His research focus is on political, economic and social developments that could have an impact on global flows. Amir holds a BA in political studies from the American University of Beirut. He was the lead analyst at Eqlim prior to joining ClipperData.