Mexico seals 2017 oil hedge at $42/bl

OREANDA-NEWS. August 30, 2016. Mexico has completed its oil hedge for 2017 by locking in \\$42/bl for its crude export basket, the finance ministry said today.

The new hedging program was secured through two different mechanisms.

The acquisition of put options covers 250mn bl at \\$38/bl, for a total of \\$1.03bn. The remaining \\$4/bl was covered by a separate 18.2bn peso (\\$980mn) account through the oil revenues stabilization fund (FEIP).

Mexico established the fund under its 2014 energy reform to manage the government's oil-related financial risk.

The finance ministry's hedge package will be submitted to the congress for approval as part of the 2017 budget process.

Mexico has been securing oil hedging programs for 12 years.

This year's revenues are protected by a \\$1.09bn hedging program negotiated in 2015 that locked in a price of \\$49/bl.

In its 2016 budget, Mexico forecast that its crude export basket would average \\$35/bl in 2017, up from a \\$25/bl price assumption in 2016.

Mexico's export basket fetched an average of \\$38.27/bl in July.