Mexico is looking to Asian markets for fuel oil after the United States imposed tariffs of up to 25 percent on Mexican goods. Mexico’s state energy company Pemex is in talks with potential buyers for its oil in Asia, especially China and Europe.
A senior Mexican government official told Reuters on condition of anonymity. Former US President Donald Trump this week imposed a 25 percent tariff on imports from Mexico and Canada. Canadian crude is subject to a 10 percent tariff, while Mexican oil is subject to a 25 percent tariff.
Most of Mexico’s oil is exported to the United States. Oil exports in January this year fell 44 percent from a year earlier to 532,404 barrels per day, the lowest in decades.
Mexico’s main market is the United States, although the country already exports some crude to Europe and Asia. India and South Korea are the top buyers for Mexican oil outside Europe, according to market analysis firm Kepler.
Last year, Pemex exported 860,000 barrels of crude per day, 57 percent of which went to the United States.
Pemex is in talks with potential new buyers outside the United States, the government official said. He declined to be named because the talks were commercially sensitive. “The good thing is that there is demand for Mexican crude in Europe, India and Asia,” he added. There are good markets for heavy crude and Pemex crude.
The official added that potential Chinese buyers were “very interested” in initial talks and “demand will determine how Mexican oil changes.”
Two sources at PMI Comercio International, Pemex’s trading arm, confirmed to Reuters that China, India, South Korea and even Japan could be suitable markets for Pemex’s fuel in the face of tariffs, although transportation costs are relatively high.
“Asian countries may only be able to take the amount of fuel that the United States used to take from Mexico,” one trader said. “Because Asian refineries will definitely be able to process Mexican crude.”
Traders are speculating whether Pemex will grant a waiver to keep the U.S. market exposed to tariffs. But government officials have flatly denied such a waiver. “After the current contracts with U.S. clients expire this month, the ships will likely go to Asia and Europe,” he said.
Two sources at the trading house also confirmed that there are no plans to make exports more competitive.
Mexico is one of the world’s top oil producers, but most of its fields are old. Mexico’s oil production recently fell to its lowest level in four decades.
Mexico’s weak refinery infrastructure and delays in the start-up of the new 340,000-barrel-per-day Olmeca refinery at the port of Dos Bocas have forced the country to import refined gasoline and diesel, most of which comes from the United States, despite exporting crude oil.
Experts say that without significant investment in oil production and refining, Mexico may also have to import crude oil in the future.
Source: Reuters