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Refiners on the Gulf Coast are shunning crude oil cargos from Mexico that feature an excessively high water content that makes the feedstock unfit for the production of gasoline and diesel fuel, Bloomberg has reported.
Instead, refiners are buying more Colombian and Canadian crude, or asking for discounts on the Pemex cargos, unnamed industry sources told the publication. According to them, Mexico’s flagship Maya crude has a water content of as much as 6%, which is six times higher than the industry standard.
This is concerning, Bloomberg said in its report, because Mexico is the second-biggest supplier of crude to Gulf Coast refiners after Canada. Financial woes at Pemex may have a role to play in the situation as the Mexican state energy major is having trouble paying outstanding bills of some $20 billion to suppliers of chemicals and equipment for reducing the water content in its crude oil.
Poor crude oil quality and price problems arising from President Trump’s decision to impose tariffs on Canadian and Mexican imports are prompting worry in the U.S. refining industry, the report also said, adding that last month, crude flows from Mexico dropped to the lowest in 35 years.
Tariffs on Canada and Mexico are currently on pause while Washington negotiates better border controls with its neighbors but the threat of them coming into effect is still present. Last week, Wood Mackenzie forecast that if tariffs enter into effect, Mexico would redirect its crude oil exports to Asia and Europe, at a rate of some 600,000 barrels daily.
Some of the crude, however, could stay at home once the Dos Bocas refinery restarts. Dos Bocas was the flagship energy project of the former Mexican president, Andres Manuel Lopez Obrador, but its progress has been hampered by numerous issues. The latest, per Bloomberg, appears to be the salt content of the crude feedstock, which is so high it could damage the processing equipment at the facility.
