Wall Street’s Largest Oil Trade (2017)
bloomberg.com
Wall Street’s Largest Oil Trade (2017)
1–10 of 25 posts
Re: Wall Street’s Largest Oil Trade (2017)
#22017
Re: Wall Street’s Largest Oil Trade (2017)
#32017
Yep but probably more relevant than ever as Mexico still hedges most of it's production. That's why they have been able to hold out against the rest of OPEC+ on production cuts. They are basically guaranteed to get a much better price for their oil so cutting production probably doesn't make sense for them. So that hedge is really giving Mexico an outsized influence on global oil right now
Re: Wall Street’s Largest Oil Trade (2017)
#42017
Mexico hedged at $49 this year for about 234,000 bpd, extremely relevant. Lots of incentives (about $6bn) to both have oversupply and not cut production.
Re: Wall Street’s Largest Oil Trade (2017)
#5Would be useful to know the long term profitability of this annual hedge rather than cherry picking a great year. If, hypothetically, every other year they lost a billion, then this $5B gain doesn't seem as great.
Re: Wall Street’s Largest Oil Trade (2017)
#6How interesting, I was just reading that same article yesterday!
The article is from 2017, but Mexico has been doing the same trades still every year - for example:
https://www.worldoil.com/news/2020/1/3/mexico-hedges-2020-cr...
This is from this January 2020 - they hedged at $49 per barrel... just before the coronavirus demand shock and oil price fall... another great Hacienda hedge.
Re: Wall Street’s Largest Oil Trade (2017)
#7Re: Wall Street’s Largest Oil Trade (2017)
#82017
Yep but probably more relevant than ever as Mexico still hedges most of it's production. That's why they have been able to hold out against the rest of OPEC+ on production cuts. They are basically guaranteed to get a much better price for their oil so cutting production probably doesn't make sense for them. So that hedge is really giving Mexico an outsized influence on global oil right now
You (and others, I know you're not alone) take a tone ("outsized") as if this is a distortion or problem that somehow needs to be fixed.
The people who hedge, were doing so because they need time to adjust their supply to demand. This is a fact of reality, and hedging is the tool that allows producers to purchase insurance against sudden changes they couldn't otherwise deal with.
Mexico or whoever, paid for their hedges, so on net it isn't some special advantage they have. It's not about preventing adjustment to demand, but about having the producers who more easily can, do so instead.
Re: Wall Street’s Largest Oil Trade (2017)
#9Would be useful to know the long term profitability of this annual hedge rather than cherry picking a great year. If, hypothetically, every other year they lost a billion, then this $5B gain doesn't seem as great.
It's not just about profitability, but insurance. It allows you to distribute the losses over a much longer period of time and fix them in your budget.
Re: Wall Street’s Largest Oil Trade (2017)
#10Would be useful to know the long term profitability of this annual hedge rather than cherry picking a great year. If, hypothetically, every other year they lost a billion, then this $5B gain doesn't seem as great.
From the article:
> From 2001 to 2017, the country made a profit of $2.4 billion.