Mexico seen trying to keep everyone happy on its oil output levels

April 2, 2001
There are some doubts that Mexico actually will cut its oil production, despite an official announcement that the country will cooperate with the Organization of Petroleum Exporting Countries' production cut.

There are some doubts that Mexico actually will cut its oil production, despite an official announcement that the country will cooperate with the Organization of Petroleum Exporting Countries' production cut.

Mexico's Energy Secretariat last week announced its exports will be reduced by 40,000 b/d as of Apr. 1 in response to OPEC's cut.

"I would not anticipate much, if any, actual physical cut," said Simmons & Co. analyst Dan Pickering. "It's very difficult to read the tea leaves with Mexico. They are trying to keep everyone happy," he said.

Petroleos Mexicanos Director Gen. Raul Munoz told reporters in Mexico City that the slowing US economy would influence the decision, which was made by Mexico's Energy Ministry rather than the state company.

OPEC has announced plans to cut production by 1 million b/d as of Apr. 1 to buttress crude prices, as global demand is expected to decline (OGJ, Mar. 26, 2001, p. 28).

Non-OPEC Mexico often has worked in tandem with OPEC on oil production increases or decreases. But Mexico did not follow the organization's first cut of the year, which was agreed upon Jan. 17 and effective Feb. 1.

Mexico attended this month's OPEC meeting in Vienna as an observer, as did Russia, Oman, Angola, and Kazakhstan. All have indicated their support for cutting their individual production levels in support of OPEC.

Reading Mexico

George Baker, petroleum analyst and director of Mexico Energy Intelligence, an industry newsletter service, said Mexico is taking a more cautious approach than in previous years, when Mexico, Saudi Arabia, and Venezuela collaborated on what they believed were appropriate production levels.

"They are being more of a follower. They are doing this to see what is going on with [US] President [George W.] Bush. They want to see the lay of the land in US-Mexican relations," Baker said.

In 2000, Mexico produced 3.5 million b/d, of which the US imported 1.4 million b/d, or 6.6% of the country's total demand, US Energy Information Administration statistics showed.

Mexico is the fourth largest supplier of imported oil to the US, said officials at the American Petroleum Institute.