Mexico Said to Take First Steps in Annual Oil Hedging Program

6/9/2017 Bloomberg 

oil wellMexico has taken the first step in its annual oil hedging program, asking Wall Street banks for price quotes on the put options it buys to lock in prices for the following year, according to people familiar with the matter.

Mexico usually buys put options from a small group of investment banks, starting as early as May but sometimes as late as July, in what’s considered Wall Street’s largest — and most secretive — annual oil deal.

The country started asking for quotes from banks as recently as late last week, the people said, asking not to be named because the information is confidential. The people didn’t say whether Mexico executed a trade after receiving the quotes. The Ministry of Finance declined to comment.

The Mexican oil hedge, which typically covers between 200 million and 300 million barrels, has the potential to roil the market as the banks writing the put options for the country’s ministry of finance hedge themselves in the market by selling oil and refined products futures and swaps.

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