Mexico’s oil prices hit negative for the first time ever as the COVID-19 crisis surges

Pemex revealed it sold Mexican oil in USD -$2.37 per barrel

Mexico’s oil prices hit negative for the first time ever as the COVID-19 crisis surges
English 21/04/2020 17:12 Tláloc Puga Mexico City Actualizada 19:50
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Yesterday, Mexican oil lost all its value and, just as American oil, its price closed in negative territory for the first time ever.

On Monday, Mexico’s state oil company Pemex revealed it sold the Mexican oil in USD -$2.37 per barrel, down from USD $ 14.35 last Friday.

The negative prices are due to the lack of oil storage caused by the low crude demand during the Great Lockdown, so operators have had to get rid of the fuel through contracts in negative numbers, a that is, paying others to accept the oil.

With the current negative price, Mexican oil registers an unprecedented crash of USD $61.72 compared to its peak price of USD $59.35 on January 6, 2020.

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In 2020, the average price per barrel was USD $35.9, under the USD $49 the federal government guaranteed for its 2020 budget.

Mexican oil is collapsing by the hand of American oil, known as WTI, whose price ended on USD $-37.63 this Monday, although it went down up to USD $-40.32, according to Bloomberg.

This price refers to future contracts in May expiring on Tuesday but given the current lack of oil storage, the holders will have to pay to get rid of them.

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For their part, the futures contracts in June closed yesterday at USD $20.43, which means that WTI prices could either recover or fall today, depending on the market forecast.

The collapse of oil prices shows that the operators consider the historic deal between the OPEC, Russia, Mexico, and other nations regarding oil production cuts in May was not enough.

In its World Economic Outlook (WEO), the International Monetary Fund (IMF) forecast that the global economy will shrink by 3% during 2020 due to the Great Lockdown, the worst recession in the last 90 years, a situation that will hamper the recovery of global oil demand.

In view of the international oil prices collapse, Mexico’s President Andrés Manuel López Obrador said that this will worsen the global economic crisis that will hit Mexico so his government will implement tougher austerity measures.

López Obrador mentioned that Mexico has enough financial reserves but his government will further adjust its budget without any layoffs of government employees.

“Despite what happens in the world, there will be protection in here because we have already made progress on establishing the State of Well-Being, which means to protect human beings from birth to death.”

In his daily morning news conference at the National Palace, along with members of his Presidential Cabinet, Mexico’s president asserted that his administration could protect up to 70% of Mexicans prioritizing the most vulnerable.

“They should not be afraid because they won’t lack their basic needs, the right to health, to education, to well-being; that is our commitment; there will be protection in here despite what happens in the world.”

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