Mexico Oil Hedge Gets Green Light
(Bloomberg) -- Mexico’s Finance Ministry got the green light to hedge the country’s oil production for next year but is still fine-tuning the details, according to people with direct knowledge of the transaction.
An internal committee just approved the decision that Mexico would lock in oil prices for next year in what’s considered Wall Street’s largest -- and most secretive -- annual energy deal, according to one person. The ministry will begin meeting with the central bank next week to start defining Mexico’s plan, the person said.
The hedge will start soon, but it’s unclear how much will be hedged and at what price, another person said. Traditionally, Mexico takes a few days or weeks between deciding to go ahead with the hedge and starting to implement it. The people asked not to be named, as they’re not authorized to speak publicly on the matter.
The oil hedge, a multibillion-dollar deal which in the past typically covered between 200 million and 300 million barrels, has the potential to roil the market. Banks writing put options for Mexico -- contracts that give it the right to sell oil at a predetermined future price -- hedge themselves in the market by selling futures and swaps.
This year, the process has been a bit trickier. Mexico is planning to change the pricing formula for its flagship Maya crude to reflect global reductions in fuel oil sulfur content that take effect in 2020. Earlier this month, Deputy Finance Minister Gabriel Yorio appeared to leave the door open to not hedging altogether when he said Mexico is evaluating it and would inform the public “if we do it.”
In 2018, the hedge had already begun by mid-year, in 2017 Mexico took its first steps to do so in June. In 2016, it began in June. Prior to that, the usual hedging period had been late August to late September. Last year, the country spent more than $1 billion to lock in prices for 2019.
To contact the reporters on this story:
Nacha Cattan in Mexico City at ncattan@bloomberg.net;
Javier Blas in London at jblas3@bloomberg.net
To contact the editors responsible for this story:
David Marino at dmarino4@bloomberg.net
Joe Ryan
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Blockchain Demands Attention in Oil and Gas
- Macquarie Sees USA Oil Production Exiting 2024 at 14MM Barrels Per Day
- CNPC Opens Sea-Land Oil Storage and Transport Facility in Bangladesh
- Oman Sees Increasing Ship-to-Ship Transfers of Russian Oil Bound for India
- US Govt Makes Record Investment of $6B for Industrial Decarbonization
- Eni, Fincantieri, RINA Ink Deal on Maritime Decarbonization
- Perenco Still Searching for Missing Person After Platform Incident
- Czech Utility CEZ Bucks Weaker Prices, Demand to Log Record Annual Profit
- Oil Falls as US Inventories Increase
- Ithaca Energy Studies Deal for Eni's UK Upstream Assets
- Equinor Makes Discovery in North Sea
- Standard Chartered Reiterates $94 Brent Call
- India Halts Russia Oil Supplies From Sanctioned Tanker Giant
- DOI Announces Proposal for Second GOM Offshore Wind Auction
- Centcom, Dryad Outline Recent Moves Around Red Sea Region
- PetroChina Set to Receive Venezuelan Oil
- Czech Conglomerate to Buy Major Stake in Gasnet for $917MM
- US DOE Offers $44MM in Funding to Boost Clean Power Distribution
- Oil Settles Lower as Stronger Dollar Offsets Tighter Market
- UK Grid Operator Receives Aid to Advance Rural Decarbonization
- Chinese Mega Company Makes Major Oilfield Discovery
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Another Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Vessel Sinks in Red Sea After Missile Strike
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension
- Equinor Makes Discovery in North Sea
- Standard Chartered Reiterates $94 Brent Call