UPDATE 3-Mexico sees its crude at $53 per barrel in 2010

* Oil exports key source of government revenue

* Lower price, falling output to result in budget deficit

(Adds detail on oil production outlook)

MEXICO CITY, Aug 11 (Reuters) - Mexico expects its basket of crude oil exports, a key source of government revenue, to fetch around $53 per barrel in 2010, Finance Minister Agustin Carstens said on Tuesday.

"We are going to use around $53 per barrel in our budget ... which is substantially lower than the $70 a barrel budgeted this year," Carstens said at a Congressional hearing.

Mexico relies on oil export revenues to fund more than a third of the federal budget. Oil production has fallen by more than a quarter since peaking in 2004, but the country remains one of the top suppliers to the United States.

Carstens did not specifically say how much oil Mexico expects to produce in 2010, but data in his presentation implies production will be 5.5 percent lower next year than this year.

Mexico produced 2.628 million barrels per day of crude on average during the first six months of 2009, according to state oil company Pemex.

Declining revenues from oil are particularly painful to the government as tax revenues are already falling as a result of a deep recession.

Carstens said the lower expected oil price and falling output will mean government revenues will be 300 billion pesos ($22.8 billion) lower in 2010 compared with income forecast for this year.

A document used by Carstens during his presentation said the government would propose a "moderate public deficit" in its budget plan that is due in Congress by September. The document did not provide further details on the size of the planned deficit.

The finance ministry has said Mexico's budget deficit this year will likely be equivalent to about 2 percentage points of gross domestic product.

Mexico budgeted for $70 oil this year and spent more than $1 billion hedging its exposure to oil prices in late 2008 as the global economy worsened. The government has not said whether it plans to hedge its 2010 oil export revenues.

Mexico's export blend MEX-OSP, which is mainly Maya heavy crude, was valued at $66.42 a barrel on Tuesday. ($1 = 13.1755 pesos) (Reporting by Pedro Da Costa, Luis Rojas Mena and Jason Lange; Editing by Lisa Shumaker)