It Ain't Heavy, It's My Maya - Impact of Changes to the Mexican Heavy Crude Benchmark - Part 2

A major component of the formula used to set the price of Maya—Mexico’s flagship heavy crude, and a key staple in the diet of many U.S. Gulf Coast refiners—was changed earlier this month, raising new questions about this important price benchmark for nearly all heavy sour crude oil traded along the U.S. Gulf, and points beyond. The change came as Maya production volumes continue to fall, and as Maya is facing increasing competition from Western Canadian Select (diluted bitumen) from Western Canada. Today we conclude a two-part series on Maya crude oil, the new price formula and its potential effects.

As we said, in Part 1, Mexico currently produces about 2.2 million barrels a day (MMb/d) of crude oil, about half of which (~1.1 MMb/d) is exported—three-fifths of which goes to the U.S.  P.M.I. Comercio Internacional S.A. de C.V. (PMI) is the crude oil marketing entity of state-controlled Petróleos Mexicanos (PEMEX) and manages the export of four distinct quality grades of crude oil, ranging from Altamira (an asphalt grade) and Maya on the lower end of the quality spectrum, to Isthmus in the middle, and Olmeca at the higher end. Most of Mexico’s crude oil exports to the U.S. Gulf Coast are Maya blends, as Mexico tends to retain most of its lighter grades (Isthmus and Olmeca) for domestic refinery consumption. However, the share of Maya exports headed for the U.S. has been falling fast—from 78% in 2013 to only 44% through the first nine months of 2016; the share of Maya bound for Europe has more than doubled over the same period and the share shipped to the Far East has more than tripled.

In today’s blog, we take a look at historical pricing for Maya and how that price has been determined through the use of the PMI official selling price formula. We will also examine how the changes to the fuel oil component of the formula, major changes in fuel oil (or bunker fuel) specifications, and the availability of heavy Canadian crude oils could potentially impact the Maya price.

Historical Maya Pricing