UPDATE 1-Mexico to resume annual hedging program as oil price slides -sources

miércoles 29 de julio de 2015 20:18 GYT

(Adds finance ministry comment)

NEW YORK, July 29 (Reuters) - Mexico has resumed its annual oil hedging program to lock in a price for its oil production and protect its bottom line against further falls in prices as U.S. crude teeters near March lows, three sources familiar with the deals told Reuters.

Morgan Stanley, Citigroup Inc, JPMorgan Chase & Co and Goldman Sachs Group Inc are some of the banks involved, in a series of recent deals worth $102 million, according to a person familiar with the transactions. The banks could not be reached for comment.

The news comes after four sizeable puts at a 520,000-barrel tranche traded starting last Tuesday, according to data from the Depository Trust & Clearing Corp. The trades give the holder the right to sell at $48 per barrel if prices drop lower, and expire in November 2016. Each trade had a premium of $3 million, or cost $5.77 a barrel.

The identity of the buyers was not listed in the repository, but the three sources indicated the trades were part of Mexico's program, one of the most widely watched operations by a nation in commodities markets. Mexico's finance ministry declined to comment. Bloomberg first reported the news on Wednesday.

Mexico has historically relied on crude oil revenue to finance about a third of its federal budget.

Two of the sources expressed surprise at how low transacted volumes have been so far. But with crude prices swooning, causing out-of-the-money put option premiums to spike, producers may want to hedge smaller volumes because it is less expensive.

Last month, two large put option trades sparked market speculation that the program had started. The trades were at a 470,000-barrel tranche each, for a $53 a barrel strike price and a $2 million premium, or $4.26 a barrel.

The hedging program comes after the recent tumble at the start of July pushed Brent and the U.S. crude benchmark near six-year lows.   Continuación...