July 18th, 2017

Exports to Mexico make up the bulk of gasoline product tanker cargoes from the US. Product moves to other countries in the region, but are dwarfed by the US's southern neighbor. The growth in this trade has had an immediate and real impact on the returns MR tanker owners are seeing in the region. Rates have been a leading indicator for rising US exports, which is be expected given the fixing window for clean tonnage goes about seven days ahead of the laycan. Mexico has been experiencing reduced refinery throughputs since mid-2016, and have been well beneath their five year average. The most recent refinery outage occurred at the end of June and planned restart is still estimated to be July 30th. This outage has boosted demand for clean product imports into the country, keeping them above their 2016 baseline level. We should see a reduction in demand for seaborne gasoline imports when the refinery restarts. This may lead to a reduction in TC14 returns in the summer, but probably not back to the lows seen in 2012-2014. (See attached PDF produced by Argus for a great summary of Mexican clean product infrastructure) Other Latin American countries have been importing more gasoline, helping to supplement cargo volumes. In the event of another refinery outage in LatAm, expect MR tankers to see the benefit.

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Court Smith - Senior Analyst czx9court@gmail.com Skype/Yahoo: czx9court

ShippingIntelligence& Analytics

Little change to the price of oil after Ecuador announced it will be abandoning production cuts. This is positive news for the west coast tanker market, which are small but tend to attract a select group of owners. Short and long term contango have not reacted to the news. If a large OPEC member abandons the caps the impact on storage incentives would be more immediate.

Tuxpan, Mexico

Mexico Refinery Problems Start

Through April

Through May

Through July