Mexico completed its 2019 oil hedge , the world’s largest sovereign derivatives trade, at an average of $55 per barrel , placing the equivalent of $1.23 billion in put options , the finance ministry said on Thursday .
Mexico hedges its crude every year and deals are closely watched by the market since the trades are big enough to affect prices. The program is a longstanding part of Mexico’s strategy for safeguarding oil revenues from market volatility.
The government said it spent 23.49 billion pesos on put options , a financial instrument that sets an agreed price to sell assets around a specified date. It did not say how many barrels of crude were covered by the trade .
“With these actions we protect that budget ... against drops in prices of oil below this level,”
the finance ministry said in a statement. As in previous years, the hedge was also backed by Mexico’s budget stabilization fund .
“As a result of these complementary strategies, a price of $55 per barrel was assured for the Mexican export blend in 2019,” the ministry said.
For more than a decade, Mexico’s government has paid for a hedge in a bid to guarantee its revenues from oil exports by state company Pemex. The program is seen as the world’s top sovereign derivatives trade.
dm