Pemex plans to export less crude to meet local demand

Petróleos Mexicanos is planning to reduce its oil exports next year while boosting national fuel production to supply an economy that is recovering from the pandemic.

Pemex refineries in Mexico, which have been operating at less than 50% capacity for seven consecutive months, plan to process an additional 200,000 to 300,000 barrels of crude per day starting in January, people with knowledge of the situation said.

That’s oil that would otherwise have been exported, and Asian refineries are expected to be hit the hardest by the export cuts. Pemex could also operate more Mexican crude at the Deer Park refinery in the Houston area once its agreement to acquire a stake in Royal Dutch Shell Plc finalizes.

Pemex did not return a call or email seeking comment.

The decision by Mexico’s state oil company to process more domestically rather than send it abroad will help Mexico reduce costly imports of refined products, such as gasoline and diesel, as demand increases. Currently, almost seven out of every ten gallons of gasoline sold in Mexico are imported, mainly from the United States.

The decision to allocate a greater proportion of locally produced oil to the country will further restrict the already tight physical market for crude, which will particularly affect Asia, the destination for more than a quarter of Mexico’s oil exports. The cuts are expected to affect mainly refineries in South Korea and India, while smaller cuts will apply to buyers in the United States and Europe.

With the move, Pemex shelves its previous plans to diversify out of the US market.

Pemex’s commercial arm, PMI, traditionally meets with its clients in November and December to discuss their crude supply capacity for the following year in 12-month contracts. While most of it is sold under such agreements, Pemex also occasionally offers cargoes on the spot market when its oil processing plans are not sufficient.