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Trump tariff on mexican goods hit U.S. Gulf oil refiners

Bloomberg

U.S. Gulf Refiners got the slam from Trump mexican tax

- Biggest U.S. importers include Shell, Valero and Chevron
- Donald Trump announced tariff in Twitter post late Thursday

By David Marino / Bloomberg

NEW YORK
Petroleumworld 05 31 2019

U.S. oil refiners could get hit if crude is included in President Donald Trump's threatened 5% tariff on Mexican goods.

Trump announced the tariff in a Twitter post, without giving details. Mexico accounts for about 10% of U.S. imports, with sophisticated refineries along the Gulf Coast geared to turn Mexico's sludgy Maya crude into gasoline and diesel.

A 5% tariff would add about $3 a barrel to the cost of Maya, which was worth about $60 Thursday, according to data compiled by Bloomberg. The profit margin for using Maya to make fuels is $6.50 a barrel, according to Oil Analytics data, so the increase in crude cost could slash that almost in half.

West Texas Intermediate, the U.S. benchmark, dropped as much as 1.6% after Trump's tweet, along with stocks and treasury yields.

Worst-hit among refiners would be Royal Dutch Shell Plc's Deer Park plant in Texas, which is a joint venture with Mexico's state oil company Petroleos Mexicanos. Shell is the biggest importer of Mexican crude, bringing in 148,000 barrels a day in February, according to data from the Energy Information Administration.

American companies Valero Energy Corp. and Chevron Corp. are the next-biggest purchasers, bringing in more than 200,000 barrels a day combined.

“At the moment the gas cracks look favorable for the refiners” in the U.S. Gulf, said Wood MacKenzie analyst Ixchel Castro in Mexico City. “But an increase in the price of Maya would affect the margins of those who already have the oil contracted and other producers will try to take advantage to place their heavy crudes at a more competitive price.”

There is some maneuver room for Pemex to send oil to Asia, but Mexico's “contractual commitments limit this flexibility,” she added.

— With assistance by Amy Stillman



Story by David Marino from Bloomberg.

bloomberg.com/ 05 30 2019

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