Mexican refinery blast may help U.S. fuel exporters

* Mexican refinery blast boosts U.S. gasoline futures

* Traders expect Mexico to increase imports of U.S. fuel

* Gulf Coast refiners including Valero may benefit

* Top importer, Mexico, may help reduce U.S. stocks (Read more about the stock market today. )

By Joshua Schneyer and Selam Gebrekidan

NEW YORK, Sept 7 (BestGrowthStock) – The explosion of a
hydroprocessing unit at the northern Mexican Cadereyta refinery
may bring export opportunities for U.S. refiners along the Gulf
Coast and boost U.S. refined products prices, requiring Mexico
to import more light fuels such as gasoline or diesel after the
blast.

The gasoil hydrotreater unit at Pemex’s (PEMX.UL: ) 275,000
barrel-per-day Cadereyta refinery was rocked by an explosion
early Tuesday and has been shut down, Pemex said. There was one
death reported and two workers suffering from serious injuries,
officials said. [ID:nN07230164]

The hydrotreater is an important component of Mexico’s most
complex refinery, since it removes sulfur to bring fuels such
as gasoline or diesel up to government-mandated environmental
specifications.

A major problem at the hydrotreater may also affect how much
crude is processed by the entire plant, including through its
fluid catalytic cracking unit (FCC), although it was not
immediately clear whether the refinery would be forced to cut
runs or not, traders and industry sources said.

[Graphic:http://link.reuters.com/dew89n]

“This should increase Mexico’s demand for imports from the
United States – one of the key things that will eventually drag
down record U.S. oil product stocks is export demand,” said
Andy Lebow of MF Global in New York.

The Mexican refinery blast comes as total U.S. crude oil
and product stocks are at their highest levels since at least
1990, according to data from the Energy Information
Administration. [EIA/S]

Higher demand from Mexico could help prop up U.S. product
prices, including RBOB gasoline futures (RBV0: ) and heating oil
(HOV0: ), which turned positive on the refinery news. Any impact
to U.S. ultra-low sulfur diesel prices along the Gulf Coast has
so far been muted, according to traders there.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Graphic;http://link.reuters.com/byb99n

Factbox on Mexico’s refinery capacity and product demand:
ID:nN07234898

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

U.S. gasoline futures prices are vulnerable to falls during
this time of year if inventories remain high, since the U.S.
summer driving season has already come to an end.

Mexican gasoline demand was around 800,000 barrels per day
in July, according to Pemex, while domestic production was less
than 445,000 bpd, prompting Mexico to import around 40 percent
of its gasoline. The outage could increase those volumes,
traders said.

Mexico bought 432,000 barrels a day of total U.S. refined
products in June, making it by far the top importer of
U.S.-produced fuels.

“Mexico is already short of refining capacity and this
will make it even shorter. It could well raise oil product
prices,” said Antoine Halff of Newedge Group in New York. “If
the refinery is down for a long time it will almost certainly
draw oil products, particularly gasoline, from the United
States.”

Most of the imports were gasoline, but sources said
Mexico’s diesel imports have been growing fastest.

A U.S. based products trader said the outage in
Northeastern Mexico could draw fuel shipments from refiners
such as those operated by San Antonio-based Valero (VLO.N: ),
which is already a supplier to Mexico.

Valero said in July it had exported over 60,000 bpd
gasoline and over 160,000 bpd distillate to Latin America
during the second quarter, helping it to turn a quarterly
profit even though U.S. fuel demand has not recovered from a
recession.

Mexico’s refinery woes may even draw fuel shipments from
merchant refiners in regions such as India, one trader
estimated.

U.S. crude futures also pared losses after the refinery
explosion on Tuesday. [O/R]

U.S. demand for refined production fell by 2.5 million
barrels a day, or nearly 12 percent, between August 2008 and
last month, according to EIA figures. But Mexican product
demand has been growing, and the country is the top destination
for U.S. refinery exports, recently buying more than twice the
amount of the next biggest buyer, the Netherlands.

It was not immediately known how long it could take to
bring the
hydrotreatment unit at Cadereyta back into operation.

(Reporting by Joshua Schneyer and Selam Gebrekidan in New
York, Kristen Hays in Houston and Robert Campbell in Mexico
City;editing by Sofina Mirza-Reid)

Mexican refinery blast may help U.S. fuel exporters