PLATTS FEATURE: Tariff tensions with Mexico ease after agreement
During the first week of June, energy markets lived a period of uncertainty after the US threatened to impose escalating tariffs on all exports from Mexico, starting with 5% on June 10 and going up to 25% by October.
The Trump administration has demanded Mexico to implement tougher actions to stem illegal immigration from Central America to the US.
However, an agreement was reached during the weekend and the tariffs were indefinitely suspended after Mexico agreed to send 6,000 national guard troops to its southern border, Trump said in a tweet Friday night.
The 5% tariff would have added about $3/b to the Mayan crude exported from Mexico, which would have greatly affected the US Gulf Coast refiners.
At the same time, Mexico could have imposed tariffs to its imports of clean products, including jet fuel, forcing state-owned Pemex, still the over whelming main importer, to raise prices domestically or absorb part of the increased cost.
Some Mexican businessment old local media there could be the possibility of importing more products from Europe or Asia, but traders on the Gulf Coast have pointed to the still lower costs of fuel from the US Gulf Coast.
Mexico’s jet fuel demand averaged around 87,000 b/d in the first three months of the year, according to government data.
Imports, which averaged 62,000 b/d in the period, satisfied around 70.45% of that demand.
In April, jet fuel Pemex imports totaled 59,575 b/d, up from 58,785 b/d in March, and almost flat to 59,537 b/d in April 2018.
JET EXPORTS TRENDING LOWER
The approach of summer brought increased jet fuel exports to Mexico, but lower demand totals nearly everywhere else in Latin America have contributed to lower cash prices on the US Gulf Coast.
With overall demand edging slightly lower, US Gulf Coast jet fuel spot prices in 2019 have trailed slightly behind 2018 values during this spring and early summer.
S&P Global Platts assessed benchmark USGC jet from March through May 2019 at a daily average of $1.9529/gal, down from $2.0092/gal over the same period last year.
Total US jet fuel exports have been trending down since March, according to the latest US Energy Information Administration data. US jet exports averaged 191,000 b/d during April 2019 and fell to 183,600 b/d during May.
During the last week of May, US jet exports fell 52% to 89,000 b/d. The four-week rolling average plunged 46,500 b/d to 161,750 b/d as May ended, the EIA data showed.
Mexico once again imported the most jet fuel from the US in March, the latest EIA data showed. The US sent 1.93 million barrels of jet to Mexico, an 86% increase over February and the most that country has imported since reaching 1.96 million barrels in August 2018.
Panama imported the next largest total of US jet fuel among Latin countries, but took in just 424,000 barrels, 30% less than it did in February.
Peru and the Dominican Republic tied for the third place at 230,000 imported jet barrels. Costa Rica, at 213,000 barrels, was the only other Latin country to import more than 200,000 barrels of US jet fuel in March.
Also notable was Chile’s intake, which fell 74% to 140,000 barrels, and Jamaica’s in take, which fell 33% to 135,000 barrels. Trinidad and Tobago brought in 79% less jet, importing only 50,000 barrels in March after averaging 347,000 barrels over the previous three months.