Variant of COVID threatens Pemex and public finances

November 29, 2021 | 5:00 a.m.

Jessika Becerra and Mario Alberto Gamez

The new variant of COVID-19, I call Omicron, collapsed the crude oil priceswhich threatens the income that Petróleos Mexicanos (Pemex) obtains from the sale of production and with it, the budgetary income of the federal government for the last stretch of 2021.

Artemis Mountainsacademic and international policy analyst La salle universityHe suggested that the consequences of the drop in the price of crude oil could be seen at the beginning of 2022.

The effect on public finances may occur at the beginning of 2022 in the negotiation of Mexico’s oil hedges (…) if the price of oil drops a lot, hedges could necessarily be a little more expensive for Mexico in the international financial market

commented in an interview.

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The specialist said that a very strong decrease in oil prices at the end of the year is unlikely because as the end of the year approaches, there is growth in demand for this fuel in the face of harsh winters.

“That can stop a drop in oil prices and it is unlikely that a confinement will be decreed in the coming weeks, so prices can be maintained for at least the rest of the year and early 2022,” he said.

Ómicron generates uncertainty and speculation

In Friday’s session, the WTI (reference of the Mexican mixture) registered a loss of 13.1% to 68.15 dollars per barrel, while the North Sea Brent it had a decrease of 11.6%, to 72.72 dollars; both prices were the lowest since September 9 of this year.

Going forward, volatility in the oil markets cannot be ruled out, not only in the face of the spread of the coronavirus, but also in the face of the energy crisis in Europe and Asia, and the actions that OPEC+ may take during its meeting next week.

Banco Base said in an analysis note.

He even estimated that the price of WTI is quoted in a range between 65 and 80 dollars per barrel.

Read: WTI falls 13%, its worst drop in more than a year

The reaction of the markets that pushed oil prices down is due to the fact that limitations are estimated in the plane travel and changes in the economic and growth plans of companies. However, it will be until February or the end of winter when the global trend is defined.

Fears around the new strain of coronavirus, which the WHO called “worrying” led to the European Union, Singapore and the United Kingdom to stop air travel from the region.

OPEC+ cut unlikely

The release of more than 50 million barrels of oil reserves in the United States, as well as the warning of the OPEC+ of delaying the production increases planned for January or even reversing the increases that have already been made, also caused prices to drop.

In this regard, Montes insisted that it is unlikely that the OPEC+ cut its production due to the fact that the winter season implies a greater demand for fuel in the northern countries where a greater use of heaters is registered, given the harsh winters that they usually go through.

Last year, OPEC+ implemented record production cuts to stabilize prices and through 2021 has gradually increased supplies as people came out of lockdown.

Since the abrupt fall in April 2020 – when mobility restrictions caused WTI to hit negative ground for the first time in its history – oil prices have accumulated a gain of almost 300%.

You can read: Oil closes with losses after the evaluation of OPEC +

Pemex production increases 5.2% annually

Mexican oil (pemex) increased crude oil production by 5.2% annually in October 2021, according to updated company statistics.

The state production company and its partners produced 1,750 million barrels per day in October, while in the same month of 2020, the reported level was 1,662 million barrels per day. Meanwhile, exports rose 3% annually, increasing from 908,000 barrels per day to 936,000 barrels per day.

From January to September, public sector oil revenues rebounded 64.6% real annual, which implied resources for the government of 686,921 million pesos.

This is its steepest rise since 1991 when records began. Prior to this data, the most notorious growth in oil revenues in the first nine months of the year was in 1995.

During the reference period, the price of the Mexican Export Mix accumulated an increase of 51%, since at the end of last year the barrel was quoted at 47.16 dollars and until the end of September it was worth 71.25 dollars.