Nov. 7 (Bloomberg) -- Mexico, the third-largest supplier of crude to the U.S., may have hedged 90 percent of 2009 oil exports at $70 a barrel to protect its budget against falling prices, UBS AG said.

The hedges would limit a potential revenue ``shortfall'' to $3 billion, Tomas Lajous, an analyst at UBS in Mexico City, wrote today in a note to clients. About 40 percent of Mexico's budget is derived from revenue from state-owned oil company Petroleos Mexicanos, Latin America's biggest company by sales.

``We think it is very likely that the Mexican government hedged some 90 percent of 2009 exports,'' Lajous said in the note. ``Given Mexico's dependence on oil exports, the hedge would be very good news.''

Mexico typically hedges 20 to 30 percent of its export sales of crude oil, Lajous said. The country sold 85 percent of exported oil to the U.S. in the third quarter. It had sales of $104 billion in 2007.

Oil futures traded in New York earlier today dropped to $59.97 a barrel, the lowest since March 22, 2007. Oil has fallen more than 57 percent since reaching a record $147.27 a barrel on July 11.

The average price for the mix of Mexican exported crude sold for $43.65 yesterday.

Oil and gas producers use hedging contracts to lock in amounts to minimize price fluctuations. Fort Worth, Texas- based XTO Energy Inc. said Nov. 5 that it hedged 70 percent of its 2009 oil production at $119 a barrel.

Spokesmen for Pemex and Mexico's energy ministry were not immediately available to comment on the country's hedging strategy.

To contact the reporter on this story: Andres R. Martinez in Mexico City at amartinez28@bloomberg.net

Last Updated: November 7, 2008 11:40 EST