Mexico has made the first moves to launch its annual US$1 billion oil hedging program by asking banks for quotes, sources familiar with the deal ...
NEW YORK/MEXICO CITY: Mexico has made the first moves to launch its annual US$1 billion oil hedging program by asking banks for quotes, sources familiar with the deal said, while buying in financial oil options contracts for 2020 has risen in recent days, consistent with the giant trade.
Mexico's 2019 sales were hedged last year at an average price of US$55 per barrel in a deal worth US$1.23 billion on put options. Pemex separately hedges its own sales, resuming the practice in 2017 for the first time in 11 years.Negotiations are notoriously secretive and limited to few participants as both sides attempt to secure the best terms in a highly competitive deal for banks. It is unclear when Wall Street banks started to submit bids to Mexico.
Market sources on Wednesday pointed to increased buying in specific contracts expiring in June 2020 and the second half of 2020 for both U.S. West Texas Intermediate crude and Brent crude, as well as so-called fences, a strategy that involves using three options contracts to protect against oil prices falling, but also makes it possible to profit from price increases.
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