Egypt: Made twice as much its Oil seesaws in a way to Insulate itself against a Rise in Oil Prices

By Abdul Rahman Bangura– 

NEW AFRICA DAILY NEWS (NADN) Freetown, Sierra Leone- Egypt has sizably traded additional auxiliary pacts to insure itself against a surge in oil costs, as some importers strive to take expectation of this year’s tax defeat during the 2020-2021 fiscal year ending in June, Finance Minister – Mohamed Maait let out in a
talk.

“We did a huge number of hedging contracts,” Maait said from his office in Cairo, without disclosing the size of the program or other details. Egypt also hedged in the previous two financial years, though it didn’t say how much money it spent.

Further, Oil prices sunk in March and April this year, as the Novel Coronavirus dissipate around the world and lockdowns resulted in the energy market declining. Benchmark Brent crude has since soared to almost $50 a barrel but is still down 25% this 2020. While that’s banged oil exporters, it’s helped the finances of importers especially those which; like Egypt, endow some fuel.

Those wanting to cinch in the advantages can purchase call alternatives, which give owners the right to amass oil at a predetermined price. In Wall Street jargon, the option is “in the money” if oil rises above the strike price. Maait is still to agree on the plan for the following fiscal year. “We are covered until June 30,” he asserted.

The North African nation utilized Citigroup Inc. and JP Morgan Chase & Co. to purchase derivatives the first time it teetered against increasing crude prices. It pumps some oil but became a net importer in 2011. The government’s appropriation is established on a regular crude price of $61 a barrel, correlated with $68 in the previous fiscal year. Egypt sliced grants on most petroleum products last year as part of a financial reform program associated to a $12 billion loan from the International Monetary Fund.

The nation proceeds to partly invest diesel and but loans. Local prices are set quarterly, taking into account global oil prices and the Egyptian pound’s exchange rate. Nonetheless, it’s plausible to be far tinier, the hedging program is a reflector likeness of Mexico’s, where the oil exporter spends billions of dollars to protect against lower prices. This year, the Mexican government will earn a payout of about $2.5 billion from put options, Bloomberg finds.

Most countries don’t divulge their hedging programs, though oil importers Morocco, Jamaica and Uruguay have bought protection in the past. Egypt is one of the world’s biggest buyers of wheat and is also considering hedging against upright prices for the grain. “We are in talks with some banks,” Maait let out.

For New Africa Daily News Abdul Rahman Bangura Reports,  Africa Correspondent

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