Pemex 'freaks out': Stops crude oil exports to the US, what do we know?

The Mexican state oil company plans suspend some crude oil exports in the coming monthsa measure that would reduce supply in an increasingly restricted world market.

Mexican oil (Pemex) canceled contracts to supply its emblematic Maya crude oil to US refineries, Europe and Asiaaccording to people familiar with the situation, who asked not to be named because the information is private.

The cut in exports, which comes at a time when OPEC and its allies are already curbing production, threatens to raise prices oil, which are at six-month highs. Physical supply—especially of heavier and more acidic grades, such as Maya—is tightening even further with the decline in Venezuelan exports following the reestablishment of US sanctions on its oil industry. JPMorgan Chase & Co. warned last week that a barrel of Brent could hit $100 this year.

Pemex's plan to suspend some exports is part of a effort for produce more domestic gasoline and diesel before the June 2 elections, the people said. President Andrés Manuel López Obrador, whose term is coming to an end, came to power promising to free the country from costly fuel imports. His multi-year effort to revamp Mexico's refining sector is paying off.

In February, the country's six refineries operated at the highest rate recorded in more than six years. Oil use should continue to increase as Pemex works to begin commercial operations of the new Olmeca refinery, also known as Dos Bocas, with the capacity to process 340,000 barrels of crude oil per day.

Pemex did not immediately respond to calls and messages seeking comment.

The disruption primarily affects exports of Maya crude, while shipments of other grades including Istmo should continue at reduced volumes, the people said. It is unclear whether Pemex's trading arm PMI will be able to continue through the reduction in exports. In 2021 and later in 2023, the company had to shelve plans to stop oil exports after it failed to increase domestic fuel production.

US refiners are likely to bear the brunt of the cut in Mayan crude exports. Fuel manufacturers such as Valero Energy Corp, Chevron Corp and Marathon Petroleum Corp import 420,000 barrels a day of the sour variety of crude. In 2023, Mayan crude oil exports reached 612,000 barrels per day.