Page 7 - LatAmOil Week 13 2020

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Latin refining demand evaporates on pandemic
DEMAND for petroleum products across Latin America is reportedly drying up, as the corona- virus (COVID-19) pandemic spreads through the region.
The decline is noticeable throughout Central and South America, but it is especially steep in Mexico and Brazil. It is also leaving US refiners without their main destination for exports.
According to a Reuters report, fuel demand in Latin America is anticipated to fall between 10% and 36% during the first half of the year. Part of the drop will result from the air travel shutdown that is gradually being imposed in many countries in Central and South America.
Meanwhile, the region’s largest importers have begun cutting purchases of fuel cargoes, mostly on the spot market. They are doing so because consumption is falling, sources at trad- ing and refining firms told Reuters.
Mexico’s state-run energy firm Pemex and its Brazilian counterpart Petrobras, Latin America’s two largest importers, have cut the number of cargoes for gasoline and diesel imports in the coming weeks, the sources told Reuters.
Data from the US Energy Information Administration (EIA) shows that the US exported a total of 2.9mn barrels per day (bpd) of petroleum last year to Latin America and the Caribbean. Typically, the region is the larg- est buyer of US-produced refined fuels. Lately, though, US fuel exports to Latin America have been affected by a “super lockdown,” one fuel trader at a merchant firm commented.
“Most opportunistic purchases motivated by falling prices have disappeared, as the largest
MEXICO
S&P revises Mexico, Pemex ratings as coronavirus spreads
importers in the region don’t have large capacity to store gasoline or diesel,” another source told Reuters.
In Mexico, retail demand fell by 15% in the last two weeks, according to fuel sellers associ- ation Onexpo.
Early crude reports from Latin America indicate that some refiners are considering a reduction of as much as 25%, IHS Markit said in a report last week. “Latin America’s jet fuel, gasoline and diesel demands are just starting to collapse,” the consultancy said.
It further stated that Mexico’s dependence on US fuel would probably make the situation there more challenging than in other Latin American nations, as imports could swamp the country.™
Fuel demand has dropped dramatically in Brazil (Photo: DTN)
THE US-based credit ratings agency S&P Global has downgraded Mexico’s credit rating, citing concerns about the impact of the corona- virus (COVID-19) pandemic and falling crude oil prices on the country’s economy and on the national oil company (NOC) Pemex.
In a statement, S&P said it had cut Mexi- co’s sovereign rating to BBB from BBB+. It also
said it had downgraded Pemex’s stand-alone credit profile to ccc+ from b-. The latter down- grade stemmed from worries that the company might have difficulty executing its business plan because of weaker cash flow from lower oil and gas prices in the years ahead.
If Pemex is downgraded any further, its bonds could slide into junk territory.
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