US Approves Crude Oil Swaps With Mexico

The Obama administration approved limited crude oil trading with Mexico on Friday, further easing the longstanding U.S. ban on crude exports that has drawn consternation from Republicans and energy producers.

Mexico’s government approved energy reforms last year that allowed its refiners to import oil, after decades of relying on its own production.

Mexico applied for a crude oil swap eight months ago after the US signalled that it was ready to relax the rule, which has been put under pressure by the huge expansion of production.

Mexico´s national oil company, Petróleos Mexicanos SA, has asked Washington for permission to start by bringing in as much as 100,000 barrels of U.S. oil a day. US refineries on the Gulf of Mexico are designed for the heavy oil produced in Mexico and Canada, while Texas and Oklahoma shale fields near refineries in those states are producing an abundance of light oil. Approval from the U.S. Commerce Department comes after the same agency allowed for exports of lightly processed oil a year ago. “We expect the law and the proper procedures will be followed as the swaps take place”. “Trade with Mexico is a long-overdue step that will benefit our economy and North American energy security, but we shouldn’t stop there”, Finkel said.

However, the Obama administration is unlikely to lift the export ban entirely, in part because environmentalists said it would encourage more petroleum development and hydraulic fracturing at a time when the nation should be pivoting away from fossil fuels to curb climate change.

The move is likely to weigh on Brent crude prices.

The Mexican decision “is a very small step towards removing the crude oil export ban and allowing the United States to fully realize its status as a global energy superpower”, said Producers for American Crude Oil Exports executive director George Baker.