Mexico Will Not Meet Its Oil Production Targets: SHCP

Mexico's average production for the current presidential term will likely fall below the initial goal of 2MMb/d, forecasts the Ministry of Finance and Public Credit (SHCP).

At the outset of López Obrador's presidency, there were discussions of potentially reaching 2.6MMb/d in crude oil production by 2024. However, the SHCP's latest projections indicate that this target will not be achieved. According to the regulator, current production stands at 1.944MMb/d. The SHCP's forecast for the coming year predicts only a modest increase of just under 40Mb/d.

Furthermore, Mexico's state-owned oil company, PEMEX, is also unlikely to meet the export targets set by the presidency. Since the start of López Obrador's term, the plan was to cease crude oil imports and use domestically produced oil in the state-owned refineries. However, the Ministry of Finance anticipates that around 994Mb/d will be sold abroad next year, representing just under 50% of the estimated production.

Adding to the challenge, the Ministry of Finance has estimated a lower price for the Mexican export mix in the coming year, projecting it at US$56.7 per barrel. This projection is explained by expectations of lower demand growth, particularly in line with the global economic slowdown. There has been a deceleration in the major economies and a weakening manufacturing sector, contributing to lower demand.

The Ministry of Finance highlights that no significant oil price increases are expected in the rest of the year due to ongoing factors weighing on prices. Despite the reduction in oil supply from OPEC+ producers, uncertainty regarding the global economic environment remains, forecasting lower oil demand, especially due to the economic slowdown in China and the EU.

This situation poses challenges for the Mexican government's ambitions in the energy sector. Falling short of production targets and continuing to rely on crude oil exports means that Mexico remains exposed to fluctuations in global oil prices and economic trends. It also underscores the importance of implementing strategies to diversify the country's energy mix and reduce its dependence on crude oil, which has been a goal of the current administration.