PEMEX Survives 1H23

With federal backup, PEMEX once more seeks to refinance its debt. While the NOC reported profit during 1H23 for the second consecutive year, it still struggles with negative outlooks due to its financial and operational struggles.

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PEMEX Receives US$3.8 Billion, Contemplates Bond Market Return

PEMEX has received MX$64.9 billion (US$3.8 billion) from the Mexican government to meet its financial obligations. The company is exploring the possibility of accessing bond markets within the next year or two, while also renewing credit lines. President López Obrador's commitment to PEMEX's recovery faces challenges as the company's profitability declined by 80% in 2Q23 due to reduced sales and weaker crude oil prices.

PEMEX Reports Profits in 1H23

In 1H23, PEMEX reported a net profit of MX$82.2 billion (US$4.8 billion), marking the second consecutive year of profit. However, challenges persist as the company grapples with a total loss of MX$2.85 trillion (US$166.9 billion) accumulated between 2011 and 2023. With half of its debt due in the next four years, PEMEX's financial health remains uncertain. Investment dropped by 13.2% in 1H23, potentially affecting modernization efforts. Crude oil extraction hit a 13-year low, and gasoline and diesel production declined. Fuel oil production increased, constituting a third of refining output.

PEMEX Is Losing Investor Confidence

PEMEX's ongoing struggles despite government interventions have led to investors demanding higher premiums for holding its bonds. Despite financial aid, the NOC's structural issues, declining oil production, and sustainability concerns create uncertainty. While President López Obrador's support has attracted interest from some investors, doubts persist about post-term support. Lack of a clear medium-term strategy, escalating debt, and recent incidents like platform explosions compound the problem.

Non-OPEC Supply to Grow in 2024

OPEC's 2024 oil demand forecast slightly surpasses previous predictions but remains below current-year estimates. Non-OPEC supply is projected to grow. Global GDP growth for 2024 is predicted at 2.5%, primarily driven by China and India. The outlook indicates tight monetary policies, with uncertainties stemming from inflation, tightening, and global debt levels. Oil demand is set to increase by 2.2MMb/d YoY in 2024, fueled by Chinese economic rebound and non-OECD expansion. Transportation fuels' demand, particularly jet fuel and gasoline, will be the key growth drivers. Non-OPEC oil supply is expected to grow by 1.4MMb/d YoY in 2024, with robust demand and upstream investments.

Black Sea Attacks Threaten Oil Supply

Escalation in the Russian war on Ukraine threatens supply routes in the Black Sea that could affect Russia’s oil exports and Ukraine’s grain exports. The countries had an agreement in place to respect these routes. Nonetheless, Russia complained about its demands not being met and pulled-out of the deal last month. Traders are not taking the incident into account until possible consequences for oil supply materialize.