So what's up with this little bar bet via the Financial Times?:
Cantarell, The Second Largest Oil Field in the World Is DyingMexico has taken out a $1bn insurance policy against oil prices falling next year, a clear signal that commodities producers remain wary about the threat of a double-dip recession.
The world’s sixth largest oil producer said on Tuesday that it had hedged all its net oil exports for 2010, by buying protection against oil prices falling below $57 a barrel.
“We want this as an insurance policy,” said AgustÃn Carstens, Mexico’s finance minister. “If we don’t collect any resources from this transaction, it’s OK with us.” That would mean the oil price had remained above $57 a barrel, he added.
Mr Carstens suggested he was not expecting prices to fall that low, but added: “More than anything, it’s a hedge against a really bad outcome.”
The move follows a successful hedging strategy at $70 this year which netted Mexico more than $5bn on the back of low oil prices between January and June. Although that figure is lower than expectations because of recent high oil prices, it still represents more than 7 per cent of Mexican government revenues this year.
Barclays Capital, Deutsche Bank, Goldman Sachs and Morgan Stanley arranged this year’s hedge. Bankers said Barclays Capital was leading next year’s programme.
Mr Carstens, joined by senior executives from the banks, said Mexico’s hedging showed that derivatives, “when used responsibly”, could be “very useful”. Mexico bought put options – contracts that give the holder the right to sell oil at a predetermined price.
His view contrasts sharply with recent comments made by senior Chinese officials, who criticised some of the same banks for selling derivatives products, including oil hedges, to state companies. Many suffered heavy losses this year.
Some of the biggest losses were suffered by airlines and shipping companies which purchased financial derivatives that forced them to pay oil prices above $100 a barrel, even when prices fell as low as $35 a barrel.
Mexico has based its budget next year on an oil price of about $59 a barrel....MORE
Ghawar Is Dying
