Mexico hedges almost all of its oil exports

[FarCenter]

By Javier Blas in London and Adam Thomson in Mexico City

Published: November 10 2008 23:38 | Last updated: November 10 2008 23:38 - http://www.ft.com/cms/s/0/5793cd1e-af68-11dd-a4bf-000077b07658.html

Mexico is taking steps to protect itself from the oil price remaining below $70 a barrel in the clearest sign yet of the concerns of producer countries at the impact of the global economic slowdown on their revenues.

The world’s sixth biggest oil producer hedged almost all of next’s year oil exports at prices ranging from $70 to $100 at a cost of about $1.5bn (£961m) through derivatives contracts, according to bankers familiar with the deal.

The cover is far higher than the country – which relies on oil for up to 40 per cent of government revenue – usually seeks. Last year, Mexico hedged 20-30 per cent of its exports.

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Signs that a big producer was hedging emerged over the summer as traders in New York noted a significant surge in options for December 2009. Mexico’s programme could have added some downward pressure to spot oil prices as banks involved in the deal – Barclays Capital and Goldman Sachs – offloaded some of their risk, selling futures, traders said. Neither bank would comment.

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