* Mexico hedges 230 million barrels of oil for 2010
* Put options guarantee at least $57 a barrel
* Mexico earned $5.089 billion from 2009 oil hedge
(Adds details on 2010 Mexican oil exports, analyst quote)
By Ed McAllister
NEW YORK, Dec 8 Mexico has hedged much of its
2010 net oil exports at $57 a barrel, the government said on
Tuesday, continuing the conservative strategy that reaped huge
profits in 2009 after the credit crisis crushed oil prices.
Finance Minister Agustin Carstens said Mexico paid $1.172
billion for options that guarantee a minimum price of $57 a
barrel for 230 million barrels of oil exports next year.
That is 100 million barrels less than a similar hedge put
in place for 2009.
Carstens did not name Mexico's counterparties but a source
familiar with the transaction said Barclays Plc (BARC.L) was
one of the institutions involved in the transaction.
Barclays declined to comment.
The 2010 hedge covers approximately 630,000 barrels per day
of oil exports. Mexico plans to export just over 1.1 million
bpd of crude next year, but imports of gasoline and other
refined products are expected to exceed 500,000 bpd in 2010.
Oil market analysts hailed the move as a savvy trade that
will protect a major source of Mexico's government revenues at
a relatively low cost as the country's economy emerges from its
worst recession since the 1930s.
"They have made another smart trade," said energy futures
analyst Phil Flynn of PFGBest Research in Chicago, who added
the big position could become a major market influence if oil
prices decline in the new year.
"If the dollar strengthens and oil demand growth is not as
strong as many people are hoping, we could see oil test these
price levels. That makes this a good trade," said Flynn.
Mexico's oil hedging is unusual. Few other major oil
exporters try to lock in prices, especially on volumes as large
as Mexico has done the last two years.
The government did not say why the hedge was smaller than
in 2009, although Mexican crude production has been declining
since 2004 while oil product imports have been rising rapidly
due to limited domestic refining capacity.
Mexico locked in a minimum price of $70 a barrel for its
net oil exports this year as crude prices surged to record
highs in the summer of 2008.
Mexico's counterparties in its 2009 hedging strategy,
including Deutsche Bank (DBKGn.DE), Barclays, Goldman Sachs
(GS.N) and Morgan Stanley (MS.N), paid the government $5.085
billion on Monday, Carstens said.
The 2010 hedge uses the put option strategy that proved
successful in 2009, the finance ministry said.
Put options grant the holder the right, but not the
obligation, to sell at the strike price.
Mexico's recent oil hedging track record is far more
successful than other major market players, such as airlines,
who have been wrongfooted by the wide sings in the price of
crude this year.
Mexico's use of options rather than flat price swaps or
futures positions allowed it to reap the benefits of a floor
price early in the year as oil crashed below $40 a barrel while
still leaving open the upside as crude rallied in the second
half of the year.
Rumors that Mexico may have been hedging its 2010 oil
exports jolted futures markets earlier this year. But the hedge
is unlikely to have an immediate market impact because it does
not come due until the end of 2010 and also due to the wide
spread between the oil price and the options strike price.
Fitch Ratings downgraded Mexico's public debt in November,
citing the country's heavy reliance on the waning oil industry
to fund government spending. Taxes on oil account for more than
a third of federal revenues.
The country's Congress set the average oil price in the
2010 budget at $59 per barrel after the administration had
sought a more conservative estimate.
(Reporting by Ed McAllister and Robert Campbell; Additional
reporting by Juan Lagorio in New York; writing by Robert
Campbell in Mexico City; Editing by Marguerita Choy)