U.S. Petroleum Trade With Latin America Flips To Surplus For First Time Ever

In a change of trade patterns, the United States booked a surplus in its trade of crude oil and refined products with Latin America for the first time since records began in 1993, but a proposal of a border tax is a major wild card for the coming U.S.-Latin America petroleum trade flows.

According to data by the U.S. Energy Information Administration compiled by Bloomberg, the U.S. recorded its first ever petroleum surplus with Latin America in October last year at 89,000 barrels a day. The surplus then increased to 184,000 bpd in November.

The shift in trade patterns with Latin America comes as Mexico, for example, imports growing volumes of gasoline because its refineries are unable to meet surging demand.

Crude oil production dropped last year in Venezuela, Colombia, Mexico and Argentina, on the back of low oil prices that sped up the natural decline of some oil fields. Among the large Latin American nations, production rose only in Brazil.

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As for Mexico, according to EIA’s This Week in Petroleum issue from January 25, the volume of gasoline trade between Mexico and the United States is significant to U.S. refineries. Mexico is currently implementing an energy reform to switch pricing to market-based prices instead of government-set prices. The reform has led to soaring retail prices.

Moreover, Mexico’s refineries have historically been running at low utilization rates because they are challenged to produce clean gasoline and distillate fuels from the available marginal barrel of heavy sour crude oil. Outages have also hampered Mexico’s six refineries recently. For the first 10 months of 2016, U.S. exports to Mexico accounted for 54 percent of total U.S. gasoline exports.

However, the so-called Border Adjustment Tax (BAT) is expected to have a huge impact on U.S. crude: it would not only impact import flows, but exports and domestic production as well.

By Tsvetana Paraskova for Oilprice.com

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