Mexican oil exports fall to a record low, US refiners fear shock

The Zhitong Finance App has learned that Mexico's oil production is expected to drop drastically, to the level before the opening of the Cantarrell oil field in the late 1970s. This situation poses a threat to US refineries, as they are most in need of oil from Mexico at this time. The decline in production, combined with the expansion project at Mexico's largest refinery, Dos Bocas, has reduced the supply of oil available to overseas markets. According to shipping reports and vessel data, exports in June plummeted to 529,000 b/d, a record low.

Joao Lopes, a senior downstream analyst at S&P Global, said about Petroleos Mexicanos (that is, Petroleos Mexicanos): “The company's debt payment issues with suppliers have further exacerbated the overall situation, as the company itself is already facing a decline in production capacity in old oil fields. Furthermore, the lack of major new findings also creates uncertainty about long-term production.”

Mexico's oil production this year averaged 1.621 million barrels per day, which will be the lowest level since the Cantarrell field first produced oil in 1979. At the time, the Cantarrell field had reserves of 35 billion barrels of oil. Mexico has failed to make another discovery on this scale like Cantarrell. Its newly discovered Zama oil field has estimated reserves of 800 million barrels of oil.

Mexican oil production has been drastically reduced, while US refineries are making every effort to meet fuel demand during the summer driving season. The decline in Mexican exports has also exacerbated this tight supply situation, as this heavy sulfur-containing crude oil is the main raw material that US fuel manufacturers rely on, and tougher US sanctions against Venezuela and ongoing tariff disputes with Canada have hindered these countries' oil exports. This has led to an increase in oil prices in Mexico and Canada, the two countries that supply the largest amount of foreign oil to US fuel manufacturers. Last month, the price of Canadian oil reached its highest level in more than two years.

Production is slowing down due to the difficulty of CNPC to pay about $20 billion in payments to suppliers, including oil field service companies, on time. These delays led to the suspension of contracts and sparked protests in oil towns that rely on Petróleos México to operate. The company previously promised to pay suppliers by March, but now it is unable to deliver on that promise, and the debt situation is currently expected to return to normal this month. Petronas plans to unveil a new strategic plan within the next three weeks, after the company lost nearly $30 billion last year.