Important players in the oil market to go offline? The world's largest oil hedging deal is in danger of shrinking

Once Mexico's desire to stop crude oil exports is realized, the crude oil market will be hit
hard.

Mexico's plan to halt crude exports by 2023 could curb its massive oil hedge and push up long-term crude prices
.

Mexico hedges every year to lock in crude oil export prices, making the Mexican Treasury one of the largest sellers of
forward oil contracts.
Last week, however, Pemex said it would cut exports by more than half in 2022 and stop all exports next year
.

The move to reduce exports means reducing the size of future hedges while reducing the amount of
oil derivatives that Mexico sells in the coming years.
Thibaut Remoundos, founder of Commodities Trading Corporation, which advises on hedging strategies, said:

"If this news turns out to be true, it will mean that one of the largest forward crude sellers will exit the market
.
" Overall, this would make long-term crude oil prices bullish
.
”

Producers like Mexico usually want to lock in profits when oil prices fall, so they sell more forward crude futures, so naturally there is a price cap
on the far end of the crude oil futures curve.
Traders and analysts say the futures curve could be more vulnerable to price spikes without the operations of these producers
.

For now, the market is still skeptical that Mexico can completely stop crude oil exports, because Mexico temporarily lacks the ability to
process all of its crude oil production into refined products.

Therefore, once Mexico does completely stop crude oil exports as planned, it will have a huge impact
on the market.
However, due to Mexico's significant decline in crude oil production over the past five years, the volume of exports that need to be hedged has also decreased
recently.

Traders say that if hedging stops completely, it will have a significant impact on
the options market.
For example, buying put options is a popular way
to hedge in oil-producing countries, including Mexico.
This usually makes put options more valuable
than call options.
But Mexico's absence could disrupt markets and reduce the value of
these puts.

In the past, the Mexican Treasury Department has made a lot of profits from hedging oil, earning $2.
38 billion in 2020 and more than $6 billion
in 2016, when oil prices plummeted.
But Mexican hedging also disrupted markets at a time when prices fell sharply, after sources revealed that the Mexican Treasury Department had hedged at $60 to $65 a barrel in early November to buy a put option to protect crude oil export revenues in 2022, when oil prices plunged $10 in November
.