Mex­ico thirsts for gaso­line

Re­fin­ers in the U.S. ex­pect to have a big year be­cause Amer­ica’s bio­fu­els rules don’t ap­ply to ex­ports.

Houston Chronicle Sunday - - BUSINESS - By Laura Ble­witt

“We’re go­ing to hit very high runs in the next two months.” Robert Camp­bell, En­erg y As­pects

U.S. re­fin­ers are set­ting up for the strong­est end of year they’ve ever had, and it’s all thanks to Mex­ico.

Na­tion­wide gross oil re­fin­ery in­puts will rise above 17 mil­lion bar­rels a day be­fore the year ends, ac­cord­ing to En­ergy As­pects, even amid a busy main­te­nance sea­son and in­ter­rup­tions at plants in the U.S. Gulf of Mex­ico that were clob­bered by Hur­ri­cane Har­vey in the third quar­ter.

“We’re go­ing to hit very high runs in the next two months,” Robert Camp­bell, head of re­search at En­ergy As­pects, said by phone. “The bal­ance looks quite bullish. Can the U.S. ex­port it? Yeah. It will.”

The chance to skip out on com­pli­ance with costly U.S. bio­fu­els reg­u­la­tions by ex­port­ing fuel is a huge in­cen­tive for over­seas sales. Un­der the Re­new­able Fuel Stan­dard, re­fin­ers aren’t re­quired to buy blend­ing cred­its called RINs for bar­rels that are ex­ported. Mex­ico has po­ten­tial to de­mand 600,000 bar­rels a day of gaso­line im­ports as its own re­finer­ies limp.

Amer­ica’s south­ern neigh­bor has been the best cus­tomer of the U.S. as Mex­ico’s own fuel fac­to­ries suf­fer from in­ef­fi­cien­cies and break­downs — in Septem­ber Mex­ico’s crude pro­cess­ing fell to the low­est since 1990, or about 33 per­cent of its to­tal na­tional op­er­at­ing ca­pac­ity.

Bullish fun­da­men­tals have supported re­fin­ers through­out the year. The Bloomberg In­tel­li­gence North Amer­ica re­fin­ing in­dex is up 73 per­cent over the past year.

Needs more fuel

Petroleos Mex­i­canos came knock­ing on the Gulf Coast’s door for more sup­plies last week. As full oper­a­tions at its largest re­fin­ery, Salina Cruz, aren’t ex­pected un­til year-end, and its Cadereyta and Mi­nati­t­lan plants are also in turn­around, at least seven ships ca­pa­ble of haul­ing 2.1 mil­lion bar­rels of fuel were pro­vi­sion­ally booked to load gaso­line and diesel through Thurs­day.

As of the week be­fore last, to­tal U.S. gaso­line stock­piles were about 5 per­cent lower than the same time last year and have fallen below the five-year sea­sonal av­er­age. But that’s no rea­son for Gulf Coast re­fin­ers to hold back, ac­cord­ing to Camp­bell.

“The U.S. is down 20 mil­lion bar­rels since Hur­ri­cane Har­vey,” he said, and those draws are show­ing up in the mid­con­ti­nent and East Coast re­gions. “The ca­pac­ity is there to sup­ply these mar­kets.”

U.S. gaso­line ex­ports rose to a record 936,000 bar­rels a day last De­cem­ber as Pe­mex scram­bled to buy fuel be­fore its historic en­ergy re­form in­tro­duced in­creases in re­tail prices at the pump. The shock of higher fuel prices sent Mex­ico’s con­sumers into hys­ter­ics, and pro­test­ers lined the streets to de­cry the so-called gasoli­nazo.

RIN factor

U.S. re­fin­ers can ben­e­fit from avoid­ing the obli­ga­tion to blend its pe­tro­leum-based fu­els with bio­fu­els.

The cred­its for 2017 com­pli­ance rose more than 200 per­cent since the first quar­ter after Pres­i­dent Don­ald Trump’s per­ceived prom­ise of re­lief faded, ac­cord­ing to Star­fu­els pric­ing data com­piled by Bloomberg. Fed­eral in­ves­ti­ga­tors is­sued sub­poe­nas on the pro­gram’s loud­est critic, bil­lion­aire in­vestor Carl Ic­ahn, last week seek­ing in­for­ma­tion on his ef­forts to change the pol­icy.

“As long as the price is right, Gulf Coast re­fin­ers will fa­vor gaso­line ex­ports to Mex­ico over mar­ginal do­mes­tic sales,” said Sandy Fielden, di­rec­tor of re­search and com­modi­ties for Morn­ingstar in Austin. “That’s be­cause ex­ports don’t at­tract RINs and the vol­umes are needed to keep re­fin­ery through­put at prof­itable lev­els.”

Jake Daniels / Beau­mont En­ter­prise

Gulf Coast re­fin­ers are find­ing Mex­ico to be a very good cus­tomer.

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