Mexican liquids production declined again in February, falling y/y by 0.21 mb/d to 1.94 mb/d, despite recovering marginally m/m. Crude output fell y/y by 0.18 mb/d to 1.7 mb/d, but was up m/m by 78 thousand b/d as heavy crude output recovered to 1.1 mb/d, although stayed lower y/y. The y/y decline was driven by a 0.16 mb/d y/y drop in super light and light crude. Pemex claims that the m/m production increase signifies an end to a 13-year production decline trend, and expects year-end crude production of 1.77 mb/d. However, we expect any bump in production to be temporary given the government’s focus on shallow reserves and the financial instability of Pemex—the latter exacerbated by the insufficient $5.5bn rescue plan announced in February. Indeed, anecdotal reports suggest crude output may fall as low as 1.3 mb/d this summer before stabilising and rising at year-end.
Crude exports rose y/y by 24 thousand b/d in February, reaching a nine-year high of 1.48 mb/d. This was driven by exports to the Far East increasing y/y by 0.16 mb/d and m/m by 0.18 mb/d to 0.49 mb/d. However, we understand these exports were sustained by running down stocks built in December and January; March exports are already lower m/m by 0.25 mb/d. Refinery runs grew m/m by 0.1 mb/d to 0.58 mb/d. Oil demand was higher m/m but flat y/y at 1.68 mb/d, with demand for gasoline (+29 thousand b/d) and diesel (+22 thousand b/d) higher m/m, suggesting an end to fuel shortages. Although the government’s anti-fuel theft campaign has had successes, the mismanagement of Pemex and the new government’s U-turn on the 2014 energy reforms has led multiple agencies and banks to downgrade Mexico’s 2019 growth forecast. As such, we do not anticipate a rapid recovery of demand, despite fuel shortages ending.