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Mexican total liquids production fell by 0.21 mb/d y/y to 1.90 mb/d in May with crude output dropping to 1.66 mb/d, down by 12 thousand b/d m/m and 0.19 mb/d y/y. The y/y crude drop was likely led by Xanab, where output has fallen by around 80% since January 2018. For 2019, we forecast crude supply declines of 0.15 mb/d. This is contrary to the market consensus view that Mexican output will stabilise, based on hope that an uptick in development activity—which rose to its highest level since December 2015, with 21 wells drilled in May—will translate to rising supply. However, we do not see an imminent supply response from this activity, especially as investment from the private sector is unlikely to be forthcoming. Indeed, Pemex recently renounced a decision to develop seven onshore areas via joint ventures. Separately, Pemex reported that platforms for the 20 new fields it intends to bring online this year are progressing on schedule. The 70 thousand b/d Xikin field is expected to produce first oil (43.6 API) in August, peaking in 2021, with the other fields starting in Q4 19.
Refinery runs in May fell by 0.12 mb/d y/y to 0.57 mb/d and utilisation rates slid by 7 ppts y/y to 35%. Oil demand was down by 14 thousand b/d y/y to 1.76 mb/d, with gasoline demand 25 thousand b/d lower y/y at 0.76 mb/d. Total net product imports were up by 0.22 mb/d y/y to 1.17 mb/d, with gasoline up by 73 thousand b/d and distillate up by 51 thousand b/d. In May, gasoline stocks increased by 0.4 mb m/m to 8.76 mb, while distillate inventories rose by 0.11 mb m/m to 5.0 mb. According to Pemex, the rise in inventories is largely due to the success of its anti-fuel theft campaign, although we note that higher imports will have helped.