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Why Mexico Changed Its Flagship Crude Formula

Mexico and IMO 2020, what a tremendous pairing. The Mexican national oil company PEMEX has been one of the few lucky free-riders of the US sanctions frenzy that saw most of Iranian and Venezuelan exports eliminated from the world markets. With heavy sour barrels rare and difficult to get, Mexico’s sulfurous crudes have become a sought-after commodity, both in the US Gulf Coast and Far East Asian demand hubs. Yet IMO 2020 might cut short PEMEX’s easy ride of the past couple of months, biting a chunk out of its refinery economics and export revenues. The Mexican NOC is cognizant of the upcoming risks and has amended its decades-old crude pricing formulae yet will it be enough?

Last week PEMEX finalized its oft-mulled drive to revamp the pricing formula of its flagship crude Maya, surprising many with its ambitious scope. The previous Maya formula looked the following way:

It incorporated the US Gulf Coast’s erstwhile sour leader West Texas Sour as well as Louisiana Light Sweet (38-39 API, 0.4 percent Sulphur), all the while mirroring the Gulf price of high-sulphur fuel oil. The latter’s inclusion is primarily due to the almost unprecedently high HSFO yield of Maya, standing at 39 percent. The massive fuel oil yield comes as no surprise if we are to remember that Maya’s density hovers around 21-22 API and its Sulphur content stands at 3.4-3.5 percent.

The new pricing formula is interesting for a variety of reasons, let’s…




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