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Mexico moves to launch world's largest oil hedge program

06 September 2019 00:30 (UTC +04:00)

Mexico has made the first moves to launch its annual $1 billion oil hedging program by asking banks for quotes, sources familiar with the deal said, while buying in financial oil options contracts for 2020 has risen in recent days, consistent with the giant trade, APA reports quoting Reuters.

A Wall Street source and a Mexican congressional source familiar with the program, both of whom declined to be identified because of the sensitive nature of the deal, told Reuters on Wednesday that banks have been submitting offers for the hedge and that Mexico had requested these quotes.

For more than a decade, Mexico’s government has paid for a hedge in a bid to guarantee its revenues for the coming year from oil exports by state oil company Pemex. The series of highly anticipated oil trades is seen as the world’s top sovereign derivatives trade.

Mexico’s 2019 sales were hedged last year at an average price of $55 per barrel in a deal worth $1.23 billion on put options. Pemex separately hedges its own sales, resuming the practice in 2017 for the first time in 11 years.

The Mexican finance ministry did not immediately respond to a request for comment.

Negotiations are notoriously secretive and limited to few participants as both sides attempt to secure the best terms in a highly competitive deal for banks. It is unclear when Wall Street banks started to submit bids to Mexico.