Mexico, the largest recipient of U.S. gasoline exports, is seeking to cancel imports of the fuel from at least one U.S. company amid the rippling effects of the coronavirus on demand. Petroleos Mexicanos’s trading unit, PMI, declared force majeure on imports of gasoline as an armada of vessels unable to discharge the fuel idles on the Atlantic and Pacific coasts, according to a person with knowledge of the situation who spoke on condition of anonymity because the information is confidential. The legal term “force majeure” typically describes an unexpected, external event that makes it impossible for a party to fulfill its obligations under a contract.
Fuel consumption at gas stations fell by as much as 50% as Mexicans follow the stay-at-home order from President Andres Manuel Lopez Obrador. The logjam is about 60 vessels waiting, said Erick Tapia, an independent Mexico oil consultant and former PMI employee. Each vessel carries on average 300,000 barrels, bringing the total on the water to about 18 million barrels.
“This will be a very complicated situation for them to unwind themselves from,” he said. With Pemex’s six refineries operating at less than 30% of their capacity, it imports about 65% of Mexico’s gasoline needs, mostly from the U.S. The country was American refiners’ biggest customer, bringing in about 500,000 barrels a day last year. Pemex didn’t immediately return email seeking comment.
Boutique Gasoline
PMI imports “boutique” gasoline that has specific limits on aromatics and benzene that make it difficult to sell outside of Mexico,a person familiar with the matter said. The bulk of it is of so-called Free On Board purchases, FOB, which means PMI is responsible for picking up the cargo at foreign ports with its own vessels.