U.S. refiners cash in on Mexico's record fuel imports

Thu Dec 22, 2016 4:48am EST
 
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By Devika Krishna Kumar and Marianna Parraga

NEW YORK/HOUSTON (Reuters) - U.S. Gulf Coast refiners are cashing in on rising fuel demand from Mexico, shipping record volumes to a southern neighbor that has failed to expand its refining network to supply a fast-growing economy.

The fuel trade could top a million barrels per day (bpd) at times in 2017 as Mexico becomes increasingly dependent on the United States for strategic energy supplies and providing business worth more than $15 billion a year to refiners such as Valero (VLO.N: Quote), Marathon Petroleum (MPC.N: Quote) and Citgo Petroleum.

The rise in Mexico's fuel imports reflects an economy that, after expanding for 27 quarters in a row even amid a public austerity plan, has been unable to increase its refining output to satisfy the consistent growth of its energy demand.

It has led to rapid reversal in energy trade between the two countries. In 2016, crude exporter Mexico will be a net oil importer from the United States for the first time as shipments of refined fuel heading south outnumber shipments of crude to the north, according to the U.S. Energy Information Administration (EIA).

Just ten years ago, the United States' net oil imports from Mexico stood at 1.45 million bpd.

Profit margins for the exports are strong for U.S. Gulf Coast refiners, said a source at a refiner involved in the trade.

"You're getting very good values if you're a Gulf coast supplier," he said. "Freight has been dirt cheap too - so it doesn't cost that much to move the barrels either."

Mexico constitutes a bright spot in what has otherwise been a dark year the U.S. refining industry with profits at a five-year low in 2016.   Continued...

 
The refinery of Mexico's national oil company Pemex is seen in Cadereyta, Mexico, December 20, 2016. REUTERS/Daniel Becerril