By Collin Eaton and Marianna Parraga
HOUSTON/MEXICO CITY, June 7 (Reuters) - The Trump
administration's clashes with Mexico could further squeeze U.S.
imports of critical heavy crude oil from Latin America, which
have fallen to their lowest in nearly three decades following
sanctions on Venezuela, U.S. government and Refinitiv Eikon data
shows.
The declines could worsen if U.S.-Mexico talks on curbing
immmigrant border crossings fail, and U.S. President Donald
Trump levies 5% tariffs on Mexican goods beginning Monday,
traders said. Oil refiners worldwide have struggled to secure heavy crude
supplies following U.S. sanctions on Venezuela and Iran and
output cuts by the Organization of the Petroleum Exporting
Countries (OPEC).
The United States relies on heavy crude to blend with
lighter U.S. oils to produce gasoline and other fuels, and
Venezuela and Mexico have traditionally been among the biggest
suppliers of that oil to the United States.
Tariffs would add upward pressure to Latin American heavy
crude prices that have already pushed U.S. refiners to seek oil
from more distant suppliers in West Africa, traders and analysts
said.
U.S. imports of Latin American crude fell to 1.4 million
barrels per day (bpd) in March, the lowest since December 1990,
according to the most recent data from the U.S. Energy
Information Administration.
The trend continued through May, according to U.S. Customs
and Refinitiv Eikon data, which shows U.S. imports from Latin
America's main suppliers dropped to 1.15 million bpd.
Together, U.S. crude imports from Mexico and Venezuela were
at their lowest in at least a decade at a combined 700,000 bpd
in the February-May period, following sanctions on state-run
Petroleos de Venezuela (PDVSA). In May, after several months of
decline, overall Latin American exports worldwide recovered a
little bit to 4.2 million bpd, from 4.1 million in April.
Mexican crude production has been falling for a decade and a
half. The new government of Andres Manuel Lopez Obrador, wary of
Mexico's reliance on U.S. gasoline, is pushing state-run Pemex
to refine more of the country's crude oil, instead of exporting
most of it.
In May, U.S. imports of Mexican crude fell 16% from April to
606,000 bpd as demand for heavy crude worldwide is boosting the
price of Mexico's Maya grade and other Latin American crudes,
traders said. But the rising prices have created more
opportunities for more barrels to go Asia.
"It makes sense for Mexico to send more to Asia, given
shortages there," said Sandy Fielden, an analyst at Morningstar.
"Refiners will pay more for heavy crude. Mexico will get better
prices as a result."
MAYA HEAVY TO ASIA
Last month, four large vessels carrying Mexico's heavy Maya
crude departed for Asia: Two to India and two to South Korea,
Eikon data shows. The combined cargoes held 6.9 million barrels,
up from 5.2 million barrels shipped in April.
U.S. refiners have warned the Trump administration that
tariffs would make Mexican crude imports less competitive, boost
fuel costs, and squeeze refiners' profit margins. "Simply put, it will increase the cost of heavy crude coming
into the U.S.," a trader said.
Several of the largest importers of Mexican heavy crude also
relied on Venezuelan supply before sanctions. Refineries owned
by Valero Energy Corp VLO.N and Chevron Corp CVX.N were
among the regular buyers of both Mexican and Venezuelan grades,
according to U.S. Energy Department figures.
The United States did not import any Venezuelan crude in
May, according to Eikon. U.S. sanctions on Venezuela's state-run
PDVSA bit deeper into the nation's imports of Venezuela crude,
which fell to zero last month, after the last legal cargoes were
discharged in April, the data showed.
One Latin American country offsetting the drop from Mexico
and Venezuela was Brazil, which in May delivered 185,400 bpd
into the United States, up from a mere 14,800 bpd in April,
Eikon data shows.
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GRAPHIC: U.S. refiners that import most Mexico crude https://tmsnrt.rs/2KfSmQL
GRAPHIC: Mexico remains key crude supplier to U.S. https://tmsnrt.rs/2Kdg404
Venezuelan crude exports to key U.S. refiners https://tmsnrt.rs/2WK05NV
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