For Mexico’s Pemex, 2022 oil hedging has started


More than 23 million barrels of certain crude options traded since Dec. 10, suggesting a major player is hedging against lower oil prices to protect 2022 revenues.

A significant volume of average-price option put spreads traded during that period. These trades involve simultaneously buying a higher-priced put option — giving the holder the right to sell at a pre-determined level — and selling a lower price put, acting as insurance in case prices collapse.

Although there’s no way to determine who initiated the trades from the data alone, people familiar with the deals who weren’t authorized to discuss the transactions publicly said the moves were consistent with Petroleos Mexicanos’ annual oil price hedging program, which traditionally takes place in the final weeks of the year.

Pemex didn’t reply to requests for comment.

The trades had a differential in strikes of either $5 or $6, data compiled by Bloomberg show. The higher strikes bought were between $66 and $68 a barrel, while the lower strikes sold were between $61 and $63. In total, those spread options would cost the buyer over $40 million in premium.

When Mexican state oil company Pemex hedges, its annual activity is smaller than and separate from the Mexican finance ministry’s own annual hedge. But the two serve similar purposes: locking in income from next year’s oil production. For Pemex, hedging helps it secure financial protection and stability in the event of roiled markets. Pemex is the world’s most indebted oil company — making protection against a sudden drop in crude extremely valuable.