PEMEX Fuel Sales Fall Ahead of OPEC's Worrisome 2Q20 Prediction

Earlier this week, the US Securities and Exchange Commission announced that PEMEX suffered a 34 percent drop in sales of fuels in Mexico, compared to 1Q19 figures. The lack of demand, driven by social-distancing measures as the country grappled with its own slice of the global COVID-19 pandemic, was to blame. Gasoline, diesel, jet fuels and other refined fuel sources of the NOC had all suffered, reported ONEXPO.

Though the government has just laid out its “new normal” reopening plan, which will gradually ease restrictions on movement and industry depending on zone, PEMEX’s poor retail sales are likely to continue for the short-term future. If figures from a poll carried out by El Financiero are to be believed, which suggest that 74 percent of Mexicans do not feel confident that it is safe to return to free movement and would therefore prefer to continue with restrictions and isolation, then sales may not rise for a considerable amount of time. Speaking with El Financiero, sector analyst Arturo Carranza said that, "the expectation for the second quarter is that things will not improve and a more disrupted quarter will be seen. In June, sales will start to pick up but it will not be enough.”

PEMEX is not alone in its suffering. ONEXPO had previously reported that sales of Premium gasoline had dropped by up to 70 percent in March, with many retail sites struggling with depressed demand. This is a problem reflected globally. The US Energy Information Association this week recast its 2020 demand fall to 8.1MMb/d from an original expectation of a 5.2MMb/d reduction, reported CNBC.

OPEC’s most recent report adds further worry for retailers the world over. Despite the OPEC+ group’s production cut of 9.7MMb/d and the additional 1MMb/d commitment by Saudi Arabia just days ago, this will not be enough to balance the market during the first half of the year. According to Bloomberg, the group’s May report said it would need to only supply 3MMb/d or 15 percent of its usual production to satisfy the market. Such is the remain oil glut and weak demand.

However, OPEC sees a much improved second half of 2020 as nations open economies again. S&P Global noted that the report suggests national governments would have a role to play. “Demand contraction in 2020 can be mitigated with sooner than expected easing of government COVID-19 related measures and faster response of economic growth to the implemented extraordinary stimulus packages,” said the report.

Though Mexico’s “new normal” will take time to take shape and there may be bumps along the way, PEMEX’s retail sales will recover in line with the progress of the globe. When this will happen is harder to say.