Mexico's Pemex to Receive $313 mln in Hedge Payouts
Mexican state oil company Petroleos Mexicanos (Pemex) expects this year to receive some $313 million from oil and financial firms involved in its annual oil hedging program, Chief Executive Octavio Romero said on Wednesday.
Pemex's hedge, which this year covers about a quarter of its gross exports volume, protects the company from price variations and helps it to cover production costs.
A larger hedging program contracted by the government secures the oil revenues needed for the federal budget.
Pemex is "partially" covered by its hedging program, which this year should provide it 7.5 billion pesos ($313 million) through put options, Romero said in a government news conference.
According to official data, the volume of barrels covered by Pemex's hedge has declined in recent years as the costs for the government's own program, which is three times the size of Pemex's, has grown to reach $1.4 billion for 2020.
Pemex started receiving money from put options under its hedging program in early March after oil prices began falling in February, the company said.
The price of Mexico's oil exports basket has stabilized around $16 per barrel in recent days. The country was expecting an average price of $49 per barrel this year, and it expects to use a reference price of $24 per barrel for its 2021 budget.
Oil demand fell by 10 million barrels per day (bpd) in February and is expected to drop another 16 million bpd by the end of April, according to calculations from oil market experts.
Over the weekend, 23 oil producers under the OPEC+ initiative agreed to withdraw 9.7 million bpd of crude from the market to stabilize prices. Mexico was part of the deal with a 100,000 bpd cut to be applied in May and June only.
"There was the risk of a complete collapse of prices. That's what we avoided", Mexican President Andres Manuel Lopez Obrador said, speaking alongside Romero. "We expect stability in prices in the future."
Romero also said Pemex has not seen a decline in oil sales, and that Mexico's crude storage capacity of up to 11 million barrels has so far been sufficient for its needs.
Pemex is also expected to accelerate a plan to refurbish its six refineries, which is 60% complete after the investment of over $400 million in 2019, to boost oil-processing capacity.