Oil Hedging Could Mean $6-bn Windfall

Mexico’s oil hedging strategy could earn the country a hefty US $6-billion payout, according to an analysis by Bloomberg.

That strategy entailed locking in the price it received for oil during 2015 at $76.40 a barrel, while the average price so far, with fewer than two weeks remaining in the hedging contract, has been $46.61 per barrel.

The contract, which cost Mexico $773 million, covered 228 million barrels and runs from December 1, 2014 until the end of this month.

The strategy was effective in maximizing petroleum revenues. “This was a very good move from the risk-management perspective to lock in a higher price than they would have gotten just on a spot basis,” said Joydeep Mukherji of Standard & Poor’s in New York.

If Bloomberg’s analysis is correct, the payout would surpass the record $5.1 billion Mexico received in 2009 following the plunge in oil prices that year.

The $6 billion estimate does not include fees.

Mexico’s is one of few countries to carry out such a hedge.

Source: Bloomberg (en) -