Mexico’s Oil to Be Hedged at $81/Barrel in 2014, Videgaray Says

Mexican oil will be hedged at $81 per barrel next year to protect against budget shortfalls due to crude price volatility, according to Finance Minister Luis Videgaray.

Congress changed the estimated oil price to $85 from $81 in the approved 2014 budget plan, which forecasts a deficit of 1.5 percent of gross domestic product. Oil hedges for 2014 cost Mexico around $450 million, Videgaray said.

Mexico’s hedging contracts are included in annual budget discussions when government officials estimate incoming oil revenue. The hedging program is usually the world’s largest of its type, Finance Ministry officials have said.

Oil exports in 2014 will be “completely covered” at $81 per barrel, Videgaray said. State-owned oil producer Petroleos Mexicanos, which has posted losses four straight quarters as crude output declines, funds about a third of the federal budget.

Mexico would consider further hedging if necessary, Videgaray said. “Depending on whether opportunities exist that demonstrate a good combination of risk and benefit, we’d be in a condition to take that opportunity,” he said.

Mexico, the third largest supplier of oil to the U.S., hedged oil revenues at $86 per barrel in 2013.

To contact the reporters on this story: Adam Williams in Mexico City at awilliams111@bloomberg.net; Nacha Cattan in Mexico City at ncattan@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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