Mexico scours the globe to stock up on diesel before price limits end

Bloomberg

Mexico is scouring the earth to stock up on diesel fuel before market-liberalization measures take effect. Petroleos Mexicanos, the country’s state-run oil company, has been on a buying spree of about a tanker load of diesel a day from the US alone this year and recently purchased it as far afield as the United Arab Emirates and China. Mexico is set to lift price limits on the fuel, used to run heavy trucks and generate electricity, making 2018 prices uncertain.
“I’m expecting a spike in January,” Rajan Vig, head of Mexico origination for BioUrja Trading LLC, a wholesale fuel distributor, said by phone from Mexico City. The halt to price setting will mean “Pemex is no longer receiving money to undercut the market in Mexico.”
The end of the price limits come as Mexico’s appetite for foreign diesel has surged this year as domestic production plummeted after the country’s biggest oil refinery went offline. Mexican refineries operated at less than 33 percent of total capacity in September, the last date for which figures are available, and crude processing is at the lowest level since 1990, according to Mexico’s energy information agency.
Mexico’s energy regulatory commission is expected to approve a measure to move free-floating fuel prices to Nov. 30, Onexpo chief executive officer Roberto Diaz de Leon said in Mexico City. US diesel exports to Mexico increased to a record high of 272,000 barrels a day in September, according to the latest data from the US Census Bureau.
Pemex says that’s because of the extended shutdowns and turnarounds at its refineries, according to a spokesman who asked not to be identified, citing company policy. Pemex’s largest refinery in Salina Cruz has been shut for most of the second half of 2017 following a fire and an earthquake, while large plants in Cadereyta, Minatitlan and Madero are undergoing maintenance.
“Diesel production in September was roughly half of what the Mexican refineries were producing back in March, so it’s not surprising that with stronger volumes we are also seeing a more diverse origin for the cargoes,” said Ixchel Castro, senior analyst at energy consultant Wood Mackenzie in Mexico City.