Thread: Oil Curse: Sooner Rather Than Later

Here Is The "Secret Weapon" That Allowed Tiny Oil Producer Mexico To Defy Giant Saudi Arabia

Snippets:

"On Friday morning, Mexican President Andres Manuel Lopez Obrador said he had resolved the matter in a phone call with Trump.

The U.S. would make an additional 250,000 barrels a day of cuts on Mexico’s behalf.


"As Bloomberg's Javier Blas, who has closely followed Mexico's oil hedgers in the recent past writes, for the last two decades,

Mexico has bought "Asian" style put options from some of the most prominent US investment banks and oil companies, in what’s considered Wall Street’s largest - and most closely guarded - annual oil deal. The options give Mexico the right to sell its oil at a predetermined price. They are the equivalent of an insurance policy: the country banks all gains from higher prices but enjoys the security of a minimum floor. So - unlike all of its OPEC peers - if oil prices remain weak or plunge even further, Mexico will still book higher prices.


In 2016, Mexico spent $1.03 billion to protect itself from a downturn in prices, according to data released in the quarterly budget balance. In recent years, Mexico has spent an average $1 billion buying the hedges. The hedge first appeared in 2001, when Mexico made a tentative showing, spending just $217.3 million on put options, a fraction of the approximately $1 billion a year it would spend later. In 2003 and 2004, with oil prices rising, the country opted not to hedge at all. The strategy came into its own in 2005: Mexico has hedged every year since without interruption, giving it a unique peace of mind that should a worst case scenario happen, it would be able to sleep soundly a t night. Agustín Carstens, who later became head of the central bank, was finance minister when a massive $5.1 billion payout came in 2009; some government officials also refer to the annual oil bet as "the Agustínian hedge"; then in 2015, after the OPEC Thanksgiving massacre of 2015, the hedge made $6.4 billion and another $2.7 billion in 2016 after Saudi Arabia waged another failed price war aimed to crushing US shale producers."

""The insurance policy isn’t cheap," Mexican Finance Minister Arturo Herrera told broadcaster Televisa on March 10. “But it’s insurance for times like now. Our fiscal budget isn’t going to be hit." Pemex, the state-owned company, has its own separate, smaller oil hedge."

Bloomberg - Are you a robot?

Here Is The "Secret Weapon" That Allowed Tiny Oil Producer Mexico To Defy Giant Saudi Arabia | Zero HedgeVois là,

1. An alleged promise from goldilocks of a "250,000 barrels a day of cuts on Mexico’s behalf. - No details of which US oil companies will be told to cut their production.

It takes time for goldilocks to tell his "friends" to sell the, targeted companies, shares.

2. Mexico buys put options, insurance, to hedge against oil price collapse, every year. - Mexico won it's bet against US banks and oil companies.