Mexican total liquids production fell in April by 19 thousand b/d m/m and by 0.23 mb/d y/y to 1.92 mb/d, lower than our forecasts. Crude output dropped by 16 thousand b/d m/m and by 0.19 mb/d y/y to 1.68 mb/d. Light production led the y/y drop, falling by 94 thousand b/d to 0.48 mb/d, while heavy crude fell y/y by 29 thousand b/d to 1.1 mb/d. Although Pemex will try to incentivise private investment through a new service model on mature fields, these efforts are not set to bear fruit until 2020 at the earliest and we maintain our forecast for a y/y 0.15 mb/d decline in Mexican crude output in 2019. Activity has stepped up of late (drilling rigs have risen to 45 in April, the highest since August 2015), so we expect decline rates to moderate gradually but not inflect. We do not envisage a return to growth over 2019-2022, despite optimism on Mexico’s medium-term outlook (crude output rising to 2.4 mb/d by 2024).
Crude exports in April fell by 0.24 mb/d y/y and by 0.13 mb/d m/m to 1.03 mb/d, driven by exports to Europe dropping by 0.2 mb/d y/y and by 0.1 mb/d m/m. Pemex increased its June K factor up from May’s premium of $0.55 to $2.15, suggesting exports to the US, which fell by 0.1 mb/d m/m in April, will continue to fall. Refinery runs in April dropped by 0.14 mb/d y/y, reaching 0.58 mb/d owing to a 12 ppts y/y drop in refinery utilisation. Oil demand in April was up y/y by 86 thousand b/d at 1.73 mb/d, with gasoline demand increasing by 37 thousand b/d y/y to 0.8 mb/d. Total product imports were higher by 0.13 mb/d y/y in April, reaching 1.26 mb/d as the government compensated for the production fall by rebuilding product inventories to prevent a repeat of January’s fuel shortages. Traffic restrictions in Mexico City in May triggered pollution warnings, which will limit gasoline and diesel sales and dampen May’s oil demand.