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Mexico hedges oil output for 2020 as risks grow

Reuters/Mexico City/New York
Filed on January 4, 2020 | Last updated on January 4, 2020 at 08.01 pm
Mexico hedges oil output for 2020 as risks grow
Mexico typically hedges using options, which gives it the right to sell oil at a predetermined price, even if the price on the market is lower.

(Reuters file)

Programme designed to protect Latin America's second-largest economy against crude price crashes

Mexico has completed its annual oil hedging programme for 2020 at $49 a barrel, the finance ministry said, at a time when the finances of both the sovereign and state oil company Pemex are particularly vulnerable.

The oil hedging programme, the world's largest financial oil deal, is designed to protect Latin America's second-largest economy against oil price crashes. It was unclear how many barrels were hedged or how much was spent.

While the finance ministry has previously withheld information about how many barrels are covered, this is the first time since at least 2001 that it did not disclose the programme's overall cost.

The hedge price is notably lower than 2019, which was hedged at $55 per barrel, but in line with the oil price set out in the 2020 budget. Mexico typically hedges using options, which gives it the right to sell oil at a predetermined price, even if the price on the market is lower.


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