Oil export price for Mexico's Pemex goes negative for first time
Mica - I found an article to discuss the massive drop in oil and curious about member opinions on this being another hit to the cartel's profit portfolio.
MEXICO CITY (Reuters) - Mexico’s oil export basket closed on Monday in negative territory for the first time ever, according to data published by state oil company Pemex, meaning the firm would have to pay buyers to offload its crude.
The average price for the company’s crude exports slid to a historic low of -$2.37 per barrel, down 116% since its closing price last Friday.
Spot prices for Mexican crude exports tanked as the price for West Texas Intermediate (WTI) crude for delivery in Houston, to which Pemex’s flagship Maya heavy crude is tied, fell deeper into negative numbers earlier in the day.
WTI for Houston delivery hit a high of WTI plus $27.50 per barrel on Monday, which is about negative $9.50 per barrel. The crude grade had a low of WTI plus $5.50 per barrel during the day.
Traders desperate to avoid owning oil fled the markets on Monday, sending crude futures into negative territory for the first time ever, in recognition that the coronavirus pandemic has sapped demand for fuel and there is not enough storage for the massive glut of oil in the United States.
Investors sold the May futures contract due to expire on Tuesday in a series of waves, finally closing on Monday at negative $37.63 per barrel, a wipe-out of some 305%, or $55.90 a barrel.
Prices clawed their way back into positive territory in early Asian trading.
Pemex’s export mix closed last Friday at $14.35 per barrel.
This is absolutely incredible Mica, I agree. But I don´t know if this will hit hard cartels´ portfolio.
Contrary to what a lot people think the illicit networks involved in the stealing of oil sell the stolen fuel to local consumers both at the retail and at the wholesaler level.
The Mexican Gov. distributes oil to the population through a network of franchises (local gas stations owned by private businessmen/companies) These people will be affected undoubtedly since it´ll be more difficult to buy from Pemex with prices at negative rates. But the cartels will be stealing and sealing oil as always. They maybe are forced to reduce their prices (which are much lower than the official rates anyway) but they could end up benefiting from this situation. If the price of oil barrel is negative this means Pemex will be more reluctant to sell it to official distributors. Official distributors will find it difficult to find oil to purchase (unless the Gov. starts sudsidizing the prices) But the cartels, who don´t have to buy the oil legally but just to steal it from the refineries, gas pipes or tanker trucks will be able to promote theirselves as the oil distributors with an unlimited offer of gas.
In conclussion, if the supply of gas from Pemex to local official distributors decreases, the cartels will be in a position to fill the supply vacuum since the people will see them as a way of avoiding official and messy petrol station providers.
They say shale production could fall by 2-4 million barrels per day. Also oilsands in Canada might shut in a million barrels. For the oil sands to shut in is insanity it takes a few month to restart a sagd operation and its no guarantee. Not cartel related but blows me away. I feel Cartels wont be hurt as they steal gas which probably wont drop that much at least in Canada it isnt.
Re: Oil export price for Mexico's Pemex goes negative for first time
I'm an oilfield native. My work was different from the oilfield. I was in low-wage labor. Concrete, wood and tar.
I despised the oilfield, but glorified the manual labor of a sewer tank, windmill and water well. I was alone but my immigrant amigos. They could do anything, but not with a specialized skill set. That was taught, and they excelled after getting the hang of it.
Now oil is below anything before. Frack fields are turning the valves off, and storage tanks have not more capacity, thus you pay for storage of the same. Frack field have a valve, but pump jacks have a rhythm, timed, but never shut off. Coronivus has caused this. Alpine air due to in pollutant deprived metros, little traffic on highways, and an oil field war started by the Saudis and Russians.
The consequences. Pemex is now twice negative to the economy of Mexico, US Shale has spigots turned off. Russia and the Saudis struggle with GDP and providing their long term visions. Mexico?
Phase 3, of Coronavirus, no way. They are a month behind USA. Marro, his affiliates and enemies, have nothing to sell of value from the Red Triangle. They makeup this shortage. by extortion, drugs, violence and desperation. There is no greater profit, or expense than a cartel. Mexico is not phase 3 and heroes of the world, AMLO, they are Phase 1, and the cartels have a much greater expense sheet. We can only hope that social distancing doesn't exist in parties or crowded 4 x 4's. You have personally promoted that.
Re: Oil export price for Mexico's Pemex goes negative for first time
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Nah I doubt Coronavirus will effect the '6 armed men in a truck'.They are all young to begin with even though they are 'super spreaders'.Maybe because business is slow they will get some kind of layoff package with severance pay (LOL)with the understanding to come back when things pick up but I doubt it.They will probably just get knocked off so the powers that be can hang onto their savings and not have to pay them and saves the double purpose of keeping their mouths shut permanently.
There's I believe over 10,000 orphaned and abandoned oil wells in western Canada ( from small players that have bankrupted)and Gov. purses$$ are giving $$billions to clean up (each well costs an average of $137,ooo to clean up)and put 10,ooo to work where social distancing is much easier on the open plains.For Mexico it is a triple whammy as oil prices were already low but now have crashed their golden goose and the other saving grace golden goose called tourism is now in the toilet and they are a poor country to begin with ( for whatever reasons like corruption).All the offshore, meaning the floating tankers filled with storage oil waiting for a home are almost full and storage prices are through the roof.A lot of the smaller and medium size oil companies are going to go under I foresee and only the biggies remaining like Chevron,Shell or nationalized oil companies like Pemex,Saudi,Venezuela or Russia.My 2 cents for what it's worth.
In the short term, this does not affect Mexico as much, and will probably not affect Mexico through the duration of the Corona crisis if it does not last into next year. It is sort of a secret, or at least the Mexican government wants to have a little attention as possible on the issue, but the thing is that Mexico hedges their oil production.
They buy put options, and that is also why they did not want to cut 400,000 barrels a day, which threatened to undermine the Opec+ agreement recently, not some nationalist strategy that a lot of media outlets reported. In fact, it was not long ago decided to keep details about their hedging strategy secret because if the market started to take notice, their premiums would go way up.
This is also the recent why AMLO has been very adamant on cracking down on oil theft. Imagine what would happen if they could not deliver the goods already sold at a fixed price.