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Puerto Vallarta News NetworkNews Around the Republic of Mexico 

U.S. to Swap Light, Sweet Crude for Heavy Mexican Oil

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August 17, 2015

The amount of crude to be allowed under the deal remains unknown, but in the past Pemex wanted to exchange as much as 100,000 barrels a day of its heavy crude for the lighter oil pumped in the US.

New York - U.S. energy companies eager to export crude oil scored a victory Friday when the U.S. government said it would approve proposals to trade American oil with Mexico, in a further erosion of the nation's four-decade ban on selling its oil overseas.

The U.S. Commerce Department has quietly informed members of Congress that it intends to approve an application by Mexico's national oil company, Petróleos Mexicanos SA, to enter into oil trade agreements with U.S. companies under which the companies could exchange U.S. and Mexican oil, according to people familiar with the matter.

The amount of crude to be allowed under the deal wasn't immediately known, but in the past Pemex, as the company is known, sought permission to exchange as much as 100,000 barrels a day of its heavy crude for the lighter oil pumped in the U.S.

The deal will help American shale drillers, which have been struggling with a world-wide glut of oil that has cut prices in half in the past 14 months. The trading deals may also reduce the justification for the Keystone XL pipeline from Canada, some experts say, because Mexico can send U.S. refiners oil similar to the heavy crude coming from Canadian oil sands.

American oil companies and their allies in Congress have been pushing the Obama administration to relax restrictions on U.S. oil trade with Mexico. The move to approve oil trade with Mexico comes little over a year after the U.S. allowed companies to begin exporting ultralight oil to foreign buyers, as the U.S. begins to thaw a policy dating from the Arab oil embargo of the 1970s that prohibited overseas sales of domestic oil.

As domestic oil production has surged past 9 million barrels a day amid a domestic energy revolution from shale formations, companies have feared a price crash here amid abundant supplies and sought ways to sell the oil in higher-priced foreign markets.

The moves have been hotly debated in the industry and Washington, amid fears that allowing U.S. oil to leave the country will result in reduced domestic supplies and higher prices. Some economists, oil companies and their supporters in Congress have argued that exports would have no impact on domestic prices, while U.S. refiners — who have benefited from a low-cost source of oil — argue that it could raise their costs and result in price increases.

Laurence Iliff contributed to the Original Article.