Higher Oil Prices Let Mexico Pull Back Billions in Pemex Support

Mexico's government is drastically reducing financial support for state-owned energy giant Pemex by up to 70% despite the oil and gas price rally. This follows expectations that Pemex will see a rare cash surplus of 95 billion pesos due to the surge in oil prices triggered by the U.S.-Israeli war against Iran. The Scheinbaum government allocated only 81 billion pesos, or $4.8 billion, for Pemex in the next year's budget, down from 243 billion pesos this year.

This 70% reduction marks a shift as Mexico's energy major is now the most indebted company globally, with a debt load of $79 billion as of the first quarter of 2025, down from $105 billion earlier this year. However, boosting refining output and dealing with crude quality issues have proven challenging for Pemex. The previous government supported the company by making it a monopoly on the Mexican energy market, while the current government is opening up the industry to private players through mixed contracts.

Despite higher oil prices, Pemex faced a loss of 45.99 billion pesos in the first quarter of 2025, the worst in two years, attributed to lower sales, higher costs, and increased depreciation. The company saw a profit in the second quarter but still lagged by 69.7% compared to the same period in 2025, indicating deeper-rooted issues.

Mexico's energy giant remains dependent on government assistance, as Moody's predicts continued support from the government.