Pemex’s Black Gold Takes Shine Off Mexican Exports, Could Provide a Recovery

Mexico’s international trade activity contracted by 1.6% year over year in September, Panjiva’s analysis of official data shows, marking the second month of declines and leaving the third quarter overall at a growth rate of just 0.3%.

Both imports and exports contracted at a rate of 1.3% and 1.8% respectively, though that was largely down to a contraction in the oil sector. Excluding trade in oil and petroleum products exports improved by 1.0% while imports inched 0.3% higher. Given the oil price sank by 14.9% year over year the contraction should perhaps not be a surprise.

MEXICAN EXPORTS DIP BACK INTO CONTRACTIONARY TERRITORY

Chart segments change in Mexican merchandise trade by direction. Calculations based on INEGI data. Source: Panjiva

The downturn in oil prices is one driver for the 12.6% year over year contraction in Mexico’s bilateral trade in energy in September, the 10th straight decline. Another has been a slide in exports relating to reduced production of oil. Exports fell 17.8% in September and by 19.1% in 3Q as a whole.

That may be beginning to turn around, with state-owned oil firm Pemex having reported its first quarterly year-over-year improvement in oil and natural gas production in 14 years in 3Q, S&P Global Platts reports.

MEXICO’S ENERGY GAP REMAINS WIDE, TOTAL TRADE IN DECLINE

Chart segments change in Mexican energy trade by direction on a monthly and three-month average basis. Calculations based on INEGI data. Source: Panjiva

The recovery in Pemex’s production may be in part due to the renewed support from the government for the company, as discussed in Panjiva’s research of Sept. 12, as part of the Lopez-Obrador administration’s energy independence plans. Commercial success though will depend on Pemex being able to monetize the extra production either through increased refined products output or via exports.

The latter may require Pemex to diversify its international export destinations. Panjiva’s data shows total Mexico crude oil exports fell 8.7% year over year in volume terms in 3Q, led by a 26.4% slump in shipments to the U.S. The U.S. represented 57.0% of exports in 3Q, leaving Pemex open to the vagaries of U.S. shale oil and gas production.

There has already been a pick up in exports to Europe though, with a 24.2% rise in 3Q, though that still represented just 14.4% of the total.

Shipments to India represented the second largest market at 11.3% of the total in 3Q. Yet, there was a 16.8% slide in shipments as India’s oil importers rearrange their supply chains more broadly, including a barter system to secure oil from Venezuela.

PEMEX REMAINS HEAVILY DEPENDENT ON THE U.S.