En Español

Very usefull links


News links




Dow Jones

Oil price



Views and News





Mexico will expand oil hedge as fuel prices float, Finance Minister says

Operations almost finished Meade says; Cost likely similar to 2017 hedge.

By Carlos M Rodriguez and Nacha Cattan

Petroleumworld 09 13 2017

Mexico will most likely expand its oil hedge marginally for 2018 as it liberalizes gasoline prices, while the cost for the government to protect crude exports against a drastic drop in prices will be about the same as for this year, Finance Minister Jose Antonio Meade said.

The earthquake off Mexico's coast last week should trigger a portion of the World Bank's largest catastrophe bond if the location in Chiapas and its magnitude of 8.1 is confirmed, Meade said in an interview with Bloomberg News. The World Bank issued in August the bond of as much as $360 million against losses from tropical cyclones and earthquakes in Mexico.

Mexico buys put options from a small group of investment banks each year in what's considered Wall Street's largest -- and most secretive -- annual oil hedge. The Finance Ministry said in its 2018 budget proposal to congress last week that a hedge strategy was employed to guarantee the average export price of $46 dollars per barrel of crude, through both put options and a beefed-up Oil Revenue Stabilization Fund, or FEIP.

"We're far enough advanced so that we're confident in saying that the $46 coverage and stabilization fund have good support," " Meade said in the interview. Moving to a free-floating price of gasoline "played a role in looking at how much we will cover."

The stabilization fund and lower reliance on oil revenue will help keep the government's price tag from rising as the program expands, Meade said.

Talks to renegotiate the North American Free Trade Agreement with the U.S. and Canada have been going well and the government's expectations for the outcome haven't changed because the discussions are evolving as predicted, Meade said. All three parties said after meeting for a second round of talks earlier this month in Mexico that they'll seek to finish talks by the end of the year.

Mexico's economy is outpacing expectations from earlier this year, but several risks loom on the horizon, including Nafta renegotiations and the presidential election in July 2018. Mexico has pushed to step up talks so that they don't interfere with the election. The early frontrunner in the race is leftist candidate Andres Manuel Lopez Obrador, who has said he'd look to end an energy reform that opened oil drilling to private bidders.

Lopez Obrador is riding a wave of support amid U.S. President Donald Trump's anti-trade rhetoric and a series of corruption scandals that are plaguing the Pena Nieto Administration.

"He's well known," Meade said about Lopez Obrador. "He's been campaigning for 18 plus years. I think he's put forth many interesting debates. I don't think he's put forth as many interesting solutions.

Meade also weighed in on a furious debate between opposition parties that are demanding the Pena Nieto administration remove an article in a Senate bill that guarantees that the current attorney general, Raul Cervantes, automatically becomes the first independent prosecutor of Mexico, serving a nine-year term. The opposition PAN and PRD parties argue Cervantes, who has worked as a lawmaker for several terms for the ruling PRI, isn't truly autonomous.

"It's a mistake to discredit a political trajectory as if it implies a lack of autonomy and independence," Meade said, rebutting critics of Cervantes. "Investigations are advancing. They're advancing at a good level. And we've never seen so many politicians subject to a judicial process as we're seeing right now."

We invite all our readers to share with us
their views and comments about this article.

Write to editor@petroleumworld.com

By using this link, you agree to allow PW
to publish your comments on our letters page.

Any question or suggestions,
please write to: editor@petroleumworld.com

Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8,10 +/ 800x600 pixels

Sept. 14-15,
Accra, Ghana


Nov 13-14 ;
Mexico City, Mexico





Contact: editor@petroleumworld.com,

Editor & Publisher:Elio Ohep/
Contact Email: editor@petroleumworld.com

CopyRight © 1999-2016, Paul Ohep F. - All Rights Reserved. Legal Information

PW in Top 100 Energy Sites

CopyRight©1999-2017, Petroleumworld   / Elio Ohep - All rights reservedThis site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission fromPetroleumworld or the copyright owner of the material.