• 4 minutes Will We Ever See 100$+ OIL?
  • 8 minutes Iran downs US drone. No military response . . Just Destroy their economy. Can Senator Kerry be tried for aiding enemy ?
  • 11 minutes Energy Outlook for Renewables. Pie in the sky or real?
  • 2 hours Shale Oil will it self destruct?
  • 8 hours NYT: Mass Immigration Roundups in U.S. to Start Sunday
  • 3 hours White House insider who predicted Iran False Flag, David Goldberg found dead in his New York apartment
  • 20 hours U.S. Administration Moves To End Asylum Protections For Central Americans
  • 12 hours South Korea imports No Oil From Iran in June - First-Half Imports Fall 37%
  • 19 hours U.S.- Taiwan: China Says Will Freeze Out U.S. Companies That Sell Arms To Taiwan
  • 5 hours Germany exits coal: A model for Asia?
  • 1 hour Migration From Eastern Europe Raises German Population To Record High
  • 7 hours Starlink Internet Courtesy of Tesla
  • 42 mins Trump vs. Xi Trade Battle, Running Commentary from Conservative Tree House
  • 2 days Oil Price Could Fall To $30 If Global Deal Not Extended
  • 2 days Rising air pollution and green house effect
  • 11 hours A Silence is heard
Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

Mexico Locks In $46 Per Barrel In 2018 Oil Hedge

Mexico has locked in an average export price of US$46 per barrel of crude oil for 2018 in its annual oil hedge, which is closely watched as the biggest in the world. In an interview with Bloomberg, Mexico’s Deputy Finance Minister Vanessa Rubio said that the hedge will be supported by a specially set up Oil Revenue Stabilization Fund, which, along with the central bank’s exchange-rate surplus, will serve to guarantee the price.

The Mexican oil hedge, or the Hacienda Hedge, is considered the biggest hedging bet on Wall Street as well as perhaps the most secretive. It has also earned Mexico—and a few large investment banks—billions since it was first made in the 1990s.

The story began when Iraq’s invasion of Kuwait took one-tenth of the global oil supply off the market, raising prices. The government then accurately predicted that the high prices wouldn’t last, betting on a decline. This accuracy has been remarkably consistent through the years, with Mexico making money most of the time when it has placed the bet.

The hedge consists in the Mexican government buying large amounts of put options from a selection of investment banks. The average that the government has spent on these put options in the last few years has been US$1 billion, Bloomberg’s Nacha Cattan writes. In 2000, Mexico began locking in prices annually and has since made a profit three times, including a US$6.4-billion windfall in 2015 after the price crash from mid-2014. For 2016, the hedge made Mexico US$2.7 billion.

The hedge for 2018, Mexico’s Finance Minister said in September, could be moderately larger than the last one amid the liberalization of domestic gasoline prices. At the same time, Finance Minister Antonio Meade told Bloomberg, the cost of the hedge aiming to secure the export prices of Mexican crude would remain largely unchanged from the 2017 bet.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play