SHCP increases projected oil price for 2022

The Ministry of Finance and Public Credit (SHCP) of Mexico increased the price of oil projected for 2020 for the Federal Revenue Law.

Now the increase in the price of crude oil used in the projections is from 42.1 to 55.0 dollars per barrel.

The new estimated level rests on the improvement observed since September last year, mainly the result of more encouraging forecasts for global demand, the acceleration of fuel consumption in China, the stability and compliance with the agreements reached by the Organization of Exporting Countries of China. Oil and its allies (OPEC +) and the additional production cuts implemented by Saudi Arabia.

The forecast also takes into account the possibility of a greater input of production in the following months, the risk that potential closures of activities represent during the year in phases relevant to world demand or possible disagreements within OPEC + that lead to new episodes of price wars.

Oil 

At the same time, it is expected that the rise in the price will more than compensate for the decrease in income caused by the update of: oil production, from 1,857 to 1,794 thousand barrels per day, which is considered a more persistent effect than anticipated adjustments to spending and investment made by oil companies in 2020 on the production of the first months of this year; and the average exchange rate against the dollar, from 22.1 to 20.1 pesos, based on a lower level at the beginning of the year than that estimated in the Economic Package 2021, on the economic reactivation underway and on the expectation of the gradual fading of the pressures that have risen in recent weeks

Thus, it is anticipated that the oil revenues of the Federal Government will be higher than those programmed by 8,700 million pesos and the total revenues by 93,500 million pesos; that the Public Sector Financial Requirements (RFSP) decrease to 3.3% of GDP from the 3.4% approved for the year and the 3.9% observed in 2020.