Mexico hedges nearly all oil exports ranging from $70 to $100

A

ASusilovic

Mexico is taking steps to protect itself if oil prices remain below $70 a barrel, in the clearest sign yet of the concerns of producer countries at the impact of the global economic slowdown on their revenues. The world’s sixth biggest oil producer hedged almost all of next’s year oil exports at prices ranging from $70 to $100 at a cost of about $1.5bn (£961m) through derivatives contracts, according to bankers familiar with the deal. The cover is far higher than the country - which relies on oil for up to 40% of government revenue - usually seeks. Last year, Mexico hedged 20-30% of its exports. Mexico’s finance ministry on Monday said in its latest quarterly report that its oil income stabilisation fund spent about $1.5bn on “financial investments, as part of the measures taken for risk management”. Oil prices hit a record high of $147.27 a barrel in July but have since fallen to less than $60 a barrel.

http://ftalphaville.ft.com/blog/2008/11/11/18049/mexico-hedges-nearly-all-oil-exports/

They call it "stabilisation" fund, rather then "hedge" fund...sounds better...:)
 
cantarell is in terminal decline. it would be really amusing if they can not meet the hedges and crude starts to go up again - and mexico goes bankrupt even sooner than what is expected now. lol

separately - we finally know who was pushing the price down to these levels. if they are finished with hedging let's guess what is going to happen to the price of crude...
 
Quote from ASusilovic:

The world’s sixth biggest oil producer hedged almost all of next’s year oil exports at prices ranging from $70 to $100 at a cost of about $1.5bn (£961m) through derivatives contracts, according to bankers familiar with the deal.
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That tells me they were just buying puts. Why would they sell the outright and risk a price increase?
 
Quote from ogarbitrage:

That tells me they were just buying puts. Why would they sell the outright and risk a price increase?
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buying puts on all exports for $1.5bn? that sound cheap to me. even assuming that the hedge was done only for exports and not for all production (Mexico will export north of 350mbbl in 09) that would make a put for 4 bucks - they would have to hedge in $100 range to get price like that...(?) that would look like a smart deal nowadays...
 
Really depends if they were buying American/Euro options, brent, or APOs. APOs are typically more expensive on a relative scale.

When CL was back north of $130, my shop was hedging small time producers w/ $90 APO floors out through Z10 for average $3.50/ea. Now look at them.

Edit: After glancing over the article, it says they only hedged 20-30% of exports.
 
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