Mexico fixes 2010 oil price for budget

Mexico has fixed an average oil price for 2010 at 70 U.S. dollars a barrel with put options bought from commercial banks, securing around 40 percent of the nation's budget next year, according to a Tuesday Finance Ministry statement.

These put options can give Mexico the right, not the obligation, to sell oil at a set price in the future.

The Mexican government gets 40 percent of its budget from state-owned oil company Petroleos Mexicanos, the only firm allowed to explore or produce oil within Mexico.

The statement also said that the government received a payment of about 5.1 billion dollars on Monday, as a result of a similar operation carried out in 2008.

During 2009, Mexico's oil price is dramatically lower than budget estimates due to a worldwide recession that originated in the U.S. However, put options bought earlier allowed Mexico to sell oil at a rate significantly higher than that of the market, guaranteeing the government's budget revenues.

Most economists are predicting that oil prices will overshoot Mexican budget estimates for 2010, adding that a global economic recovery will raise all raw materials prices.

Source: Xinhua