Mexican energy flows are reminiscent of Dr. Dolittle's mythical animal, the push-me-pull-you, as they are beckoned and ushered in contrasting directions.
U.S. imports of Mexican crude last month climbed above 800,000 bpd for the first time since November 2014. This is the result of a number of factors, but in large part due to hurricane disruptions in recent months.
Mexican crude imports in September dropped to the lowest month on our records (since at least 2012), as Hurricane Harvey caused refineries along the U.S. Gulf Coast to temporarily shut down, reducing oil demand.
In response to hurricane activity in the Gulf of Mexico, several vessels that were loaded on the east coast of Mexico have headed south instead, around Cape Horn and to the U.S. West Coast - a rare journey indeed. Accordingly, Mexican crude imports to the U.S. West Coast have climbed to the highest on our records in November at 111,000 bpd.
That said, after an absence of nearly two years, the U.S. West Coast had already been receiving a steady stream of heavy Mexican Maya crude over the last year - but from the west coast of Mexico, rather than from the east. As our ClipperData illustrate below, the vast majority of Mexican crude heads to the U.S. Gulf Coast:
This increase in Mexican crude to the U.S. has coincided with a rise in total crude exports from the country. Export loadings reached a fourteen-month high in November, climbing above 1.3 million barrels per day for the first time this year.
While the U.S. remains the overwhelming leading destination for Mexican barrels, crude destined for South Asia has ramped up significantly in recent months to meet higher Indian demand. A similar scenario has played out for Northwest Europe in recent months also:
The increase in Mexican crude exports is not in response to rising domestic production. In fact, Mexican output is heading in the opposite direction. As the latest IEA Oil Market Report highlights below, Mexican oil supply is in structural decline, ticking gradually lower (hark, lower left):
The rise in exports is instead related to greater volumes being available for export after a series of refinery outages in the country. One such example is Mexico's largest refinery, Salina Cruz; it has been taken offline for sustained periods this year after both storm and earthquake damage.
As the chart from the IEA below illustrates, crude throughput remains adrift of the five-year range to the downside amid depressed refinery activity. While outages have been particularly pronounced this year, a persistent lack of investment by state-run oil company Pemex over the years has meant refineries are in a similar situation to Mexican domestic oil production - in structural decline.
Lower refining activity means Mexico is increasingly having to pull in more petroleum products to meet its domestic needs. Gasoline imports have climbed over 10 percent higher this year to nearly 470,000 bpd, while middle distillate imports have risen over 20 percent to 250,000 bpd.
The U.S. is the source for 90 percent of middle distillate deliveries, and just over 80 percent of gasoline receipts.