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Uncertainty Drives Investors to Oil Stocks

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Mexico’s Pemex Is Losing Market Share To Private Companies

Mexico’s state energy major Pemex has lost some 13 percent of its share of the local fuel market to private companies despite efforts by the government to strengthen the troubled company.

The 31-percent market share loss has built since Andres Manuel Lopez Obrador’s government came into power, Bloomberg reports. During the previous administration’s term, with a host of energy reforms including a liberalization of the energy market, Pemex had lost a market share of just 3.5 percent to private fuel retailers.

It was these reforms that, in 2016, allowed private players on the local fuel market to encroach on Pemex’s territory, and rising fuel demand has helped them. Now, the government is considering curbing these reforms to protect Pemex’s market share.

“The cracks are beginning to appear” a representative of one private oil trader in Mexico told Bloomberg. “Demand continues to exist. In fact, it has increased. And if you restrict supply, people are going to have to find more creative ways of bringing in the product.”

Lopez Obrador came into power with the promise to restore Pemex to its former glory and keep it in state hands. So far, there has been little to show for it. Pemex has become the most indebted oil company in the world despite government support, including major tax relief and it is struggling to maintain production.

The company recently revised down its output projections for next year by more than 8 percent in a move that many expected given its debt levels. The country’s Ministry of Finance said it now expected Pemex to produce 1.857 million bpd in 2021, down from a projection of 2.027 million bpd made in April this year. This would still be an increase on this year’s average daily but there are doubts Pemex would be able to reach its 2020 target, too.

By Irina Slav for Oilprice.com

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