Page 6 - LatAmOil Week 44 2021

LatAmOil MEXICO LatAmOil

Mexico reportedly moving

ahead with annual oil hedge

MEXICO’S government has reportedly begun considerably their price [for Mexico],” he told
the process of arranging its annual oil hedge, a Bloomberg in February of this year.
collection of financial deals designed to protect Herrera also said that the Mexican gov-
the country against fluctuations in the crude ernment had been purchasing put options
market by locking crude prices in ahead of time. in smaller batches over the course of the year
Sources in the energy trading sector told rather than pushing the whole deal through
Bloomberg earlier this year that Mexican over a relatively short period. Additionally, he
authorities had begun purchasing put options stated that Mexico was willing to arrange its
that would allow it to sell oil at pre-set prices hedges at shorter notice. The government has
within the $60-65 per barrel range. They did typically worked with Wall Street financiers and
not say how much Mexico City was spending oil majors to set the prices and terms of the deal
on these derivatives or how much of next year’s in advance, by the end of November for the fol-
crude production might be covered by the lowing year, but it is now open to doing so in
hedge. the same year it is trying to hedge, he explained.
As of press time, Mexico’s Finance Minis- Mexico executed its first oil hedge deal in
try had not responded to requests to verify the 1991 and began carrying out annual hedges
Bloomberg report. regularly in 2001. Within the last two decades, it
In past years, the Mexican government has has spent more than $15bn on the transaction,
reported spending about $1bn per annum on the which allows it to guard against unexpected
hedge deal, working with Wall Street financiers dips in oil prices. The hedge has paid out on four
and the trading arms of international oil com- occasions, allowing the country to earn back
panies (IOCs) to lock in prices for 200-300mn $16.5bn. ™
barrels of oil. About two years ago, though, it
began keeping some of the details of its hedging
arrangements confidential. Since then, Mexican
officials have become even less forthcoming on
this front, and the government has classified
certain information about the annual hedge as
a state secret.
Finance Minister Arturo Herrera has
explained this move towards confidentiality by
saying that Mexico City was trying to prevent
hedge funds and other third parties from trading
ahead of the hedge in order to secure the low-
est prices for put options. “Several institutions
outside the hedge could use the information
to speculate, buying the same financial instru-
ments ahead of the government, increasing Mexico’s annual crude oil hedge is worth about $1bn (File Photo)

Pemex back in the red in Q3-2021

MEXICO’S national oil company Pemex was ($3.75bn), compared with a profit of MXN1.4bn
back in the red in the third quarter of this year, ($67.98mn) in the same period of last year. In
despite the recent recovery in its crude produc- the second quarter, by contrast, the state-
tion levels. owned firm posted a net profit of MXN14.4bn
The slide appears to be the result of a com- ($699.3mn).
bination of foreign exchange losses and higher The NOC also reported that its foreign
tax payments. exchange losses had reached MXN47bn
Pemex, which is the world’s most indebted ($2.28bn) in the third quarter, while its revenues
oil company, said in its most recent interim totalled MXN384.7bn ($18.68). Meanwhile, its
statement that it had lost a total of MXN77.2bn financial debts totalled $113bn.

P6 www. NEWSBASE .com Week 44 04•November•2021