U.S. looks to Mexico for in-demand sour crude barrels
(Reuters) - The United States is on track in July to take in higher imports of crude oil from Mexico for a second month, as global demand for sour crudes ramps up following production cuts from OPEC+ that have cut off a pivotal source.
Prices for sour barrels climbed this month after Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC), deepened its output cuts to 1 million barrels per day.
Mexico now finds grades such as its heavy Maya sour in high demand, and the United States is benefiting from its close proximity to the country, said Matt Smith, lead oil analyst for the Americas at Kpler.
This month, Mexico is set to send around 770,000 bpd of oil to the United States, according to data provider Kpler. That is after Mexico sent about 825,000 bpd to the U.S. in June, the highest amount since November 2015, Kpler data showed.
Mexico's oil exports globally are track to send about 1.02 million bpd in July to top destinations like the U.S., South Korea and Spain, the data showed.
This has eased slightly from the 1.31 million bpd it sent abroad in June, the highest amount it has sent globally since February 2019.
"High demand is expected during this month and next," said a source at PMI Comercio Internacional, the entity of state energy company Pemex that markets Mexican crudes on the international market.
"But by September, there will likely be a drop in sour demand, followed by an increase in demand for light, sweet crudes."
The source spoke on the condition of anonymity because information about expected demand for the country's flagship crude is commercially sensitive.
Because of the higher demand, Maya's discount to international benchmark Brent is on track to tighten to about $8.70 per barrel in the third quarter, much tighter than its $14.50 a barrel discount in the second quarter, Tudor, Pickering, Holt and Co said in a note on Tuesday.
The United States is also likely taking more because it has decreased its amount of oil rigs, the source at PMI Comercio Internacional said.
Oil rig counts serve as an indication of future production. Also, the U.S. government continues to try to refill its Strategic Petroleum Reserve following last year's record drawdown.
In turn, domestic sour crudes from the United States are staying within the country instead of being exported, said Rohit Rathod, a senior oil market analyst with Vortexa. The U.S. is also increasing its imports from Saudi Arabia and Iraq, he added.
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