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Latino Daily News

Sunday December 23, 2012

Mexico Sets Oil Price at $86 per Barrel in 2013

Mexico Sets Oil Price at $86 per Barrel in 2013

Photo: Oil barrels

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The government has purchased options to cover crude exports at a price of $86 per barrel and ensure it meets the targets set in the Revenue Law, the Mexican Finance Secretariat said.

The put options cover the “average price of the Mexican export blend” of crude, the secretariat said in a statement.

The options provide the “right (but not the obligation) to sell petroleum at an average price per barrel of $86 in 2013,” the secretariat said.

The options provide insurance so that if the price of petroleum is below $86 per barrel, “the federal government would receive a payment that would compensate it for the drop in budgetary revenues,” the Finance Secretariat said.

Mexico’s oil sales account for more than one-third of the federal Treasury’s revenues, prompting the government in recent years to purchase options as insurance against volatility in the price of oil on global markets.

The Finance Secretariat spent $1.5 billion on options in 2009 that guaranteed it the right to sell crude at $70 per barrel when the price fell below that level on the international market.

The Petroleum Revenue Stabilization Fund, or FEIP, a public trust created by the secretariat in 2001, handles the options transactions, the Finance Secretariat said.

The FEIP’s mission is to ease the effects of fluctuations in the price of oil on public finances and the national economy, the secretariat said.

The oil hedging programs “are part of the federal government’s risk management strategy,” guaranteeing the availability of the resources needed to fund the outlays approved in the 2013 federal budget, the secretariat said.

The lower house of Congress on Thursday approved 3.95 trillion pesos (about $311.52 billion) in spending for 2013.

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