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Lopez Obrador says oil hedge will yield 150bn pesos this year
MEXICAN President Andres Manuel Lopez Obrador has said that his administration’s oil hedging programme for 2020 may bring in 150bn pesos. The extra funds will be welcome, as state budget revenues are under pressure from historically low crude prices.
“This coverage gives us around 150bn pesos [$6.29bn],” Lopez Obrador was quoted as say- ing by Reuters last week. “That is, it compensates for income lost because of the oil price drop,” he said.
The finance ministry’s decision to execute the programme was a “very good” one, he added.
The Centre of Budgetary and Economic Investigation (CIEP), an independent think- tank based in Mexico City, concurred with the president’s conclusions. “The hedge is a buffer in these types of events, and we estimate it will provide 150bn pesos,” it said.
These funds “will compensate [for] 36% of the total amount of oil revenues that the Min- istry of Finance estimates it will stop collecting [as a result of the market decline] and 77% of the oil revenues of the federal government,” CIEP said in a report published on its website earlier this month.
As such, it added, the hedging programme will serve to compensate the federal government for the loss of oil revenue this year. It stressed, though, that the hedge would not provide any cover for revenues lost by the state-run oil major Pemex.
Mexico’s government uses the oil hedge for protection against fluctuations in world crude markets. It normally finances the programme, known as the Hacienda Hedge, by a mixture of purchasing options from North American banks and oil majors and reserving part of a
special fund. This allows it to lock in a certain amount of oil revenue even if prices turn weak, but it also puts the country at risk of losing prof- its at times when the outlook is more bullish.
The hedge was certainly a boon for Mexico this year, as it locked in more than half of the country’s oil production in at a rate of $49 per barrel. This is a relatively high price, given that the coronavirus (COVID-19) outbreak has caused crude to plummet amidst weak demand, inadequate storage capacity and a price war between Russia and Saudi Arabia. Some grades, including Mexico’s main export grade Maya, dropped to historic lows in negative territory earlier this month.
CIEP noted that Mexico’s crude export bas- ket had gone from averaging $51.7 per barrel in January to averaging $48.5 and $24.1 in Feb- ruary and March respectively. The Ministry of Finance estimates that the basket price will aver- age around $24 per barrel for the remainder of the year, it added.
COLOMBIA
Cenit offers payment deal to customers
The pipeline operator aims to help oil producers by allowing them to delay 50% of their tariff payments
The hedge will not provide cover for Pemex’s lost revenues (Photo: Mexico News
CENIT, a subsidiary of Colombia’s national oil company (NOC) Ecopetrol, has offered to let oil producers postpone full payment of transporta- tion tariffs in May and June.
In a statement dated April 29, the company said it was willing to provide special financing
arrangements to users of its pipelines. Under
these arrangements, customers will only have
to pay 50% of the usual pipeline tariffs up front
for shipments in May and June and may then
wait until September to pay the remaining 50%,
it explained.
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w w w . N E W S B A S E . c o m Week 17 30•April•2020
