The Day at a Glance | December 29 2021

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*Mexico`s government plans to decrease crude oil exports starting this year to cover national demand for fuels.

*House prices slowed down for a third consecutive month in the United States; they logged an 18.4% annual increase in October.

Economic environment

PEMEX will reduce oil exports. In a press conference held yesterday, Director of Petróleos Mexicanos, Octavio Romero, assured that the state company will decrease its crude oil exports in 435 thousand daily barrels (close to half of what it currently exports) before halting exports completely in 2023, as part of Andrés Manuel López Obrador`s self-sufficiency energy plan. The goal is to expand production for local consumers and substitute gasoline and diesel imports from the United States. However, there is skepticism revolving around the ambitious goals set by Romero as Mexico doesn’t count on sufficient refinery capacity to process all crude oil production. In the last 5 years alone, Mexican refineries have operated below 50% capacity due to low investment and limited maintenance on infrastructure; something PEMEX should change quickly for it to reach its goals. Additionally, this measure raises doubts about the capacity to generate foreign exchange (usually through export revenues) and pay off the state-owned company`s foreign debt, which is currently set at 113 billion dollars. The oil company`s credit profile could deteriorate and the need for Mexico`s Government to financially back PEMEX increases. According to Romero, Mexico seeks to refine 1.51 million daily barrels in 2022 and 2 million in 2023 in order to produce between 190 thousand and 220 thousand daily barrels of gasoline in 2022 and up to 635 thousand and 735 thousand in 2023, with which it could substitute up to 50% of gasolines imported from the U.S. (based on 2020 figures). The Dos Bocas (located in Tabasco) and the Deer Park (recently acquired in Houston) refineries are fundamental for the plan. According to Bloomberg, Asian markets (South Korea and India) would be the first to see less supply from PEMEX, although the same would gradually happen in European and U.S. markets.