US gasoline exports breached the 1 million b/d level in the week ended March 23, the fourth time this has happened and the first week it has ever occurred in the first quarter.
An S&P Global Platts analysis of US and Mexican data sets on Thursday found this is probably attributable in part to weak gasoline production in Mexico, which has been trending well below historic norms.
Weekly data from the US Energy Information Administration showed US gasoline exports have only risen above 1 million b/d in a given week three times before in data going as far back as May 2010. All three of those weeks fell within either November or December of 2017 and 2016. When US exports hit 1.099 million b/d in the week ended March 23, they were more than 80% above levels from the year-ago week.
It is widely known that, in contrast to the US, Mexico’s peak gasoline demand for the year occurs in these winter months. According to the EIA, no single foreign country imports more US gasoline than Mexico, which took in 421,000 b/d in 2017 or about 56% of all exports. Moreover, from 2013-2017, US monthly gasoline exports hit their high for the year in either November or December, supported by peak annual demand in Mexico.
A US Gulf Coast gasoline source said it is “safe to say that the Mexican market accounts for 50%-75% of [US] export activity. I don’t have specific data for the recent weeks but I do know that in February the local Mexican production reached an all-time low, so clearly a lot needs to get imported.”
In this context, it’s clear that Mexico’s recently suboptimal gasoline production is a key factor behind strong US exports. Data from SENER, Mexico’s Energy Secretariat, confirm that Mexico’s six refineries produced an average of 164,000 b/d of gasoline in February, which was the weakest single month of production for the country going at least as far back as January 2010.
The US market source said that with Mexico’s gasoline output being so poor, the country has had to turn to “exotic” sources for fuel imports. He said he was aware of Mexico importing at least five different gasoline cargoes from China in February, which is rather unusual.
Diving deeper into SENER data show this production weakness is due in large part to the Minatitlan and Madero refineries, which collectively produced just 4,500 b/d of gasoline in February, 90% below their collective production from February 2017.
Production data for March has not yet been published, but will likely also be below historically typical output. In mid-March, Pemex told S&P Global Platts that it was still in the process of restarting the Minatitlan and Madero refineries.
El Financiero, a Mexican newspaper, recently reported that the 190,000 b/d Madero refinery is running at less than half of its total capacity with nine of the facility’s 17 plants in operation, including distillate and jet fuel hydrotreaters, cokers and reformers. The rest of the Madero plants are expected to be restarted in April, allowing Madero’s output of refined product to reach 135,000 b/d, according to refinery sources quoted by El Financiero.
While Mexico’s gasoline output has sagged below historic norms, motor fuel demand has trended in the opposite direction. Gasoline sales in February averaged 777,200 b/d, which is more than 6,000 b/d up from the same month last year, according to SENER data. It is also worth noting that, after the winter months, Easter week in Mexico is considered a major vacation and travel period when gasoline consumption increases. For many Mexicans, this period extends into the week after Easter, as many schools are closed.
With fuel output in Mexico, as well as Venezuela, below historic norms, the same US gasoline source said that foreign demand for US-made gasoline has recently been “consistently strong” recently. This would suggest that foreign buyers of US fuel have been undeterred by stronger US prices.
CBOB in Houston, probably the single most liquid cash market for gasoline in the US, has averaged $1.752/gal from March 1-28, which is about 16% above the same average from March 2017, according to Platts historic data.
Source: BloombergPrevious Next