The Latin American crude oil market is anticipated to profit from the tanker market moving forward.
Shipbroker Gibson stated that Latin America has historically been home to a large population and a large refining base in its newest weekly report. Nevertheless, decades of underinvestment and economic turbulence joined with overseas competition have seen regional players fight to service domestic demand. Recent attempts to increase the continent’s refining capacity have slipped, with Limetree Bay refining in St Croix the newest casualty. In contrast, Petrobras has attempted to divest some refining assets. One credible refining project endures, with Pemex developing a greenfield project in Dos Bocas. So, what does this imply for regional tanker trade over the medium term?
Mexico’s East Coast Trade Cut
As stated by Gibson, the region’s lack of refining capacity development is a double positive for tankers. Crude production in Brazil and Guyana is growing. However, with no progress in domestic crude processing capacity, any improvement in production will go to export. Maybe the only negative for tankers in the region originates from Mexico. With Pemex preparing to launch the 340kbd Dos Bocas refinery in 2023, products imports from the US Gulf will notice a significant decrease from the 470kbd traded into Mexico’s Caribbean coast in 2019. This will cut off much of the trade moving into Mexico’s East Coast. Nevertheless, this is a minor damaging outcome for the regional tanker trade, given the short-haul nature. Longer exports falling to South America and the West Coast remain relatively safe.
The shipbroker replied that there will be little progress on refining the region’s largest economy. Although Petrobras has earmarked $1bn to complete the second train at RNEST, the proposed 145kbd expansion project will not appear online until at least 2027, if it is completed at all.