April 30, 2020 / 8:07 PM / a month ago

Mexico's Pemex to reduce gasoline, diesel imports through year end

MEXICO CITY, April 30 (Reuters) - Mexico’s state-run Pemex, one of the world’s largest gasoline importers, said on Thursday it plans to reduce fuel purchases through the end of the year, a move that could affect its main suppliers, the U.S. Gulf Coast refiners.

Refineries along the Gulf and in other parts of the United States have drastically reduced crude processing amid plummeting domestic demand for fuel and fast-declining exports, coupled with the lack of options for continue storing.

Earlier this month, Pemex declared force majeure over fuel purchases from its trading unit, PMI Comercio Internacional, after over 60 vessels waiting to discharge imports created a bottleneck near Mexico’s ports.

PMI is now negotiating with its own suppliers an immediate reduction of fuel cargoes to be imported in May and June, particularly from the United States. It is also in talks with vessel owners to cut demurrage fees over cargoes that accumulate weeks of delay to discharge.

“Another factor that will play a role in reducing our costs is a reduction in gasoline and diesel imports from May through the end of the year,” Pemex said in a presentation of its results from the first quarter.

Pemex did not elaborate on imports volumes to be cut, but the government of President Andres Manuel Lopez Obrador had anticipated that a portion of imports would be replaced by domestic fuel as Pemex is planning to process more crude at its refineries.

In February, the United States sent 1.14 million barrels per day (bpd) to Mexico, its first market for fuel exports, according to the most recent data from the U.S. Energy Information Administration.

Pemex processed 542,000 bpd of crude at its refineries in the first quarter, in line with its 2019 average. Analysts estimate that Mexico increased refining to up to 700,000 bpd this month, but meeting the 1-million-bpd target Pemex set for next month is seen as steep due to the poor condition of several facilities and the very low demand for fuel.

The company announced a massive loss of almost $24 billion in the first quarter, which surpassed its full-year loss for 2019. Its sales declined by 24% to $12.08 billion due to the plummeting crude prices for exports and lower domestic sales.

Pemex also said it is applying a $1.9 billion cut in its investment budget, mostly in exploration and production, while planning more austerity measures amid an adverse price environment, but it does not foresee new external financing.

Reporting by Ana Isabel Martinez, Marianna Parraga and David Alire Garcia; Editing by Leslie Adler

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