Oil Price War Hits PEMEX

After last Sunday’s failed attempt to reach an agreement on oil production between Russia and Saudi Arabia, an oil price war between these two countries resulted in an over 30 percent drop in the barrel price and contributed (together with COVID-19) to a global market crash on Monday. PEMEX is now feeling the effects of these contractions with a 31.66 percent drop in the value of the Maya crude mix. On Tuesday, PEMEX informed the public that the Maya mix was currently priced at US$24.43 per barrel, which is a significant drop considering its price was at US$59.35 on January 6, 2020. 

Other significant crude mixes did not fare much better, with the WTI reaching a low of US$31.13 per barrel, representing the biggest drop in a day since the beginning of the Gulf War in January 1991. 

Ready for more? Here’s the Week in Oil & Gas!

Tainted Medicine from PEMEX Hospital Kills Seven

Seven deaths have now been confirmed to be directly linked to the use of heparin sodium contaminated with bacteria that was inadvertently being distributed by a regional PEMEX hospital in Villahermosa, Tabasco. It is currently believed that a total of 67 patients were treated with this tainted batch. Heparin sodium is an anticoagulant used to treat and prevent clots in veins, arteries, lungs and the heart. Users include recipients of dialysis and those undergoing open heart surgery. 

PEMEX Receives First Payment of Oil Revenue Coverage

Activated after the panic generated by this week’s oil price drop, the oil revenue coverage that was originally first contracted in 2017 generated its first payment to PEMEX for the month of February 2020. This coverage is meant to protect PEMEX from sudden drops in its barrel price. The cost of this coverage went up over 50 percent for 2020 compared to 2019. PEMEX followed up the announcement of this first payment with a reassurance that it had more than enough liquidity to pay its suppliers.       

Diplomats Meet at American Embassy to Discuss Concerns Over Mexico’s Energy Policies

The Mexico City US Embassy hosted a meeting last Friday with diplomats and representatives from the UK, Canada, the EU, Spain, France, Germany, Italy and the Netherlands to discuss concerns over President Andrés Manuel López Obrador’s energy policy. While this administration has repeated its intentions not to intervene in previously signed contracts, López Obrador and other of his representatives have made comments regarding the relative “fairness” of these contracts that have made investors nervous.      

PEMEX CDS Reaches Historic High  

The value of Credit Default Swaps (CDS) against PEMEX’s debt have reached a historically high watermark after going up 561.55 points over four consecutive days from Sunday to Wednesday this week. Markets consider this a temporal reaction to oil price fears and COVID-19 affectations.