Bloomberg News

Mexico Oil Hedging Costs Rose 44 Percent Last Year

May 25, 2012

Mexico, the third-largest supplier of oil to the U.S., paid $1.17 billion last year to lock in prices for 2012 exports at $85 a barrel, a 44 percent increase compared to hedging costs paid the previous year.

Mexico’s Central Bank used “the most notable and trusted” commodities brokerages as counterparts to hedge 211 million barrels of crude exports this year, according to a Finance Ministry document obtained by Bloomberg News through an access to information request. In 2010, Mexico paid $812 million to buy oil hedges for 222 million barrels for 2011.

Mexico’s hedging contracts are included in annual budget discussions when government officials set an estimate for oil revenue, which accounts for about a third of the public budget. Mexico’s crude-hedging program is probably the world’s largest of its type, Miguel Messmacher, the Finance Ministry’s chief economist, said Jan. 31 to reporters in Mexico City.

The Mexican mix of oil for export has traded at an average of $109.89 this year, 29 percent higher than the estimate of $84.90 a barrel for the annual budget this year, according to data compiled by Bloomberg.

Mexico’s crude exports fell 10 percent in the first quarter to 1.23 million barrels a day from 1.37 million barrels a year earlier, according to statistics from the Energy Ministry. About 77 percent of that went to the U.S.

Canada and Saudi Arabia are the two largest suppliers to the U.S., according to the Energy Information Administration.

To contact the reporters on this story: Carlos Manuel Rodriguez in Mexico City at carlosmr@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net.


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