Mexico said to begin 2015 oil hedge -traders
By Marianna Parraga and Robert Gibbons
HOUSTON/NEW YORK Aug 5 (Reuters) - Mexico has begun structuring its oil hedging program for next year, market sources said on Tuesday, citing one of the world's biggest sovereign hedging programs as weighing on crude prices.
The annual hedge, run by Mexico's finance ministry to protect public finances heavily dependent on crude revenue, typically occurs around August and September each year and its timing is still closely watched by traders as its sheer size can move markets. Some traders said a pick-up in options volatility was likely tied to anticipated hedging activity from Mexico.
Traders said talk of the hedging may have contributed to a recent downturn in prices, with U.S. benchmark crude having fallen more than 5 percent in two weeks to its lowest since January. However, some analysts noted that prices for 2015 and beyond have not fallen as quickly, which would be expected if Mexico were hedging next year's production.
"They are already doing their hedge for 2015. There are a couple of banks involved," said a trader who spoken on condition of anonymity.
Goldman Sachs Group Inc could be involved in the 2015 program, after participating in last year's operation, the source added.
The finance ministry did not immediately respond to requests for comment. A spokesman for Goldman Sachs declined to comment.
The 2014 Mexican oil hedge was executed by at least three banks, also including JPMorgan Chase and Co and Barclays Bank Plc.
Under the program, Mexico buys options to guarantee a minimum value for its crude, selling contracts for future delivery at the locked-in price. Continuación...