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Mexico exports three rare cargoes of medium sour Isthmus to the USGC

wsj.com

Medium-sour Isthmus has typically been used as diluent for heavy sour grades

- Isthmus is 32-33 API gravity crude
- A 1.8% sulfur content crude with high gasoline, diesel, jet fuel, naphtha yields.

By Maria Eugenia Garcia / Platts

NEW YORK
Petroleumworld 01 28 2020

Mexican state-owned oil producer Pemex has exported three separate cargoes of the Mexican medium sour Isthmus between December and January, which has resumed trading activity of such crude in the Americas region over the past three years, according to US Customs Bureau and Platts Analytics data recently released.

The last time an Isthmus crude cargo was imported into the US was December 31, 2017, when 406,000 barrels were loaded out of the port of Dos Bocas, Tabasco, and delivered to Honolulu, Hawaii, the same data showed.

However, Pemex data shows April 2018 was the last date the company loaded 8,000 barrels of Isthmus exported to the Americas region, without disclosing the exact destination of the cargo.

Isthmus is a medium sour grade with a 32-33 API gravity and 1.8% sulfur content with high gasoline, diesel, jet fuel, naphtha yields.

US refiner Valero has been the buyer of the three Isthmus cargoes recently imported and loaded out of the port of Pajaritos, Veracruz, located in the Gulf of Mexico.

The vessel Uraga Princess delivered nearly 500,000 barrels of the Mexican grade to the port of Corpus Christi on January 16, with Valero as the receiver, according to the US Customs data.

Also the tankers Ningbo Dawn and Leo Sun delivered 407,000 barrels and 495,400 barrels of Isthmus, respectively, at Port Arthur between December 11-23, the same data showed.

Medium-sour Isthmus has typically been used as diluent for heavy sour grades -- Mexican Maya included -- in USGC refineries with coking and sulfurization units.

The recent imports of Isthmus by Valero were believed to be used by the company to blend the crude with high sulfur fuel oil, according to market sources.

Valero did not immediately respond to a request for comment.

Since the US Department of Treasury imposed sanctions on Venezuela's state-owned oil producer PDVSA in January 28, Valero has been seeking replacements for Venezuelan crudes,

Chevron Valero and Chevron were the top three buyers of Venezuelan crudes in the US market.

In 2019, Pemex changed the formula used to calculate its exports crude prices. The new formula excluded the fuel oil component to avoid a major price impact of the International Maritime Organization sulfur-cap regulation, which went into effect on January 1.

As a result of that change, the differential of Isthmus deliveries to the USGC dropped nearly $8 year on year to minus $4.40 in January from plus $3.50 in the same month of 2019, according to Platts data. The average outright price for Isthmus deliveries to the USGC was nearly $60.50/b in 2019, but so far in January, the average price has been $63/b, the same data showed.

LOW OPERATING RATES IN MEXICAN REFINERIES AND MORE BARRELS OF ISTHMUS

In Mexico, Pemex's petroleum refining systems runs a mix of Isthmus-Maya crudes to process oil products.

However, production units with a larger intake of Isthmus crude have been Pemex's 330,000 b/d Salina Cruz, 315,000 b/d Tula, 275,000 b/d Cadereyta and 245,000 b/d Salamanca.

Low operating rates at those refineries, caused by declining crude production and poor maintenance works, are believed to be the reason for the availability of such crude in the export market.

On September 2019, the average total production capacity of Mexico's refining system was 40%, the most recent Secretariat of Energy (Sener) data showed.

Additionally, since 2010, crude oil inputs to Mexico's petroleum refining system have declined 50% to 600,000 b/d from 1.2 million b/d, according to a report published by the US Energy Information Administration in 2019.



By Maria Eugenia Garcia from S&PGlobal Platts

spglobal.com 01 27
2020

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