Sources: Mexico has launched the world's largest oil hedging program
- Sep 07, 2019-
Mexico has traditionally bought up to $1 billion in financial positions to hedge its oil revenues for the coming year.The reason for hedging is that oil sales are Mexico's primary source of government revenue.
The highly anticipated series of oil deals are seen as the world's top sovereign derivatives deals because they are large enough to affect oil prices.
This year, the Mexican government aims to invest $1.23 billion in put options to hedge its 2019 oil sales and keep the average price of crude below $55 a barrel.
Pemex, the state oil company, also hedged its sales separately and resumed the practice in 2017 for the first time in 11 years.
Mexico has been dealing with volatile oil prices since last year.Maya heavy crude, the country's main oil export, has been trading above the U.S. benchmark for the past eight months.
Mexico's finance ministry did not immediately respond to a request for comment.