OREANDA-NEWS. December 16, 2016. Mexico's state-run Pemex residual fuel oil production declined 3pc to 229,442 b/d in the first ten months of the year compared with 235,546 b/d the same period last year. Production fell to an all-time low in 2015 since Pemex first began reporting statistics in 1990. This year's drop reflected lower refinery utilization rates which also reduced the refiner's output of gasoline by 11pc to 341,025 b/d and diesel by 17pc to 228,714 b/d in the first ten months.

Pemex refineries were operating at a 56pc utilization rate from January to October 2016, compared with a 61pc utilization rate in January to October 2015. Pemex's crude throughputs have gradualy declined from 1.30mn b/d in 2009 to 1.06mn b/d in 2015, and could fall below 1mn b/d in 2016.

Residual fuel oil accounts for about 21pc of Mexico's refining output. The 320,000 b/d Tula refinery produced 40,015 b/d of resid in October and operated at a 43pc utilization rate. Pemex plans to convert Tula's resid into distillate by installing a coker by the end of next year through a tolling agreement. The 330,000 b/d Salina Cruz refinery produced 87,639 b/d of fuel oil in October and was operating at a 72pc utilization rate. The 245,000 b/d Salamanca refinery produced 41,285 b/d of fuel oil in October and operated at a 69pc utilization rate.

The reduced resid production drove down Mexico's fuel oil exports by 5pc to 116,071 b/d in the first ten months of the year compared with 121,554 b/d during the same period last year. The US imported 53,000 b/d of Mexican resid from January to September. Mexican fuel oil barrels also move to Panama and Singapore. Finding a home for the Mexican resid has been challenging due to ample availabilities in the US Gulf coast and Iran entering the fuel oil sellers list after sanctions against them were removed at the beginning of the year.

Mexican annual residual fuel oil imports have fluctuated widely over the last ten years from 10,992 b/d to 44,585 b/d. Even though production dropped in the first ten months of the year, imports were also down to 7,822 b/d. The decline reflected lower residual fuel oil demand for inland power generation - 100,314 b/d in the first ten months of the year, compared with 106,602 b/d during the same period in 2015. Residual fuel oil demand for power generation has been gradually displaced by natural gas.