FAST FIVE: Amid OPEC Turmoil, Mexico Banks Over $2 Billion From Oil Hedge
Amid OPEC Turmoil, Mexico Banks Over $2 Billion From Oil Hedge Tyler Durden Wed, 12/02/2020 – 14:20 As various members of the OPEC cartel argue (virtually) over extending production cuts, losing market share, and collapsing domestic sovereign revenues amid a pandemic-driven global economic slump, one oil-producing nation is doing very well on its own.
Having abandoned the OPEC+ production cut deal earlier in the year, Bloomberg reports that Mexico will cash in its oil price insurance policy this year for the fourth time only in the last two decades, receiving a payout of about $2.5 billion from its 2020 sovereign oil hedge, people familiar with the transaction said.
They are the equivalent of an insurance policy: the country banks all gains from higher prices but enjoys the security of a minimum floor.
The government hasn't yet disclosed the amount, but it released some financial data earlier this year that allows analysts to make an approximate calculation.
“The insurance policy isn't cheap,” Mexican Finance Minister Arturo Herrera told broadcaster Televisa earlier this year.