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Wednesday, 5 September 2018

Did Egypt sign fuel hedging contracts with JP Morgan and Citi?

Did the gov’t sign fuel hedging contracts with JP Morgan and Citi? The Egyptian government reportedly signed fuel hedging contracts with two international banks,a senior official told Reuters’ Arabic service yesterday. Other sources speaking to the local press say that the firms were JP Morgan and Citibank. While the source said that the effective date of the agreement has not yet been set, others speaking to Al Mal suggest it will come into effect during the FY2019-20 fiscal year. An official from the Finance Ministry had told us earlier this week that the contracts need not necessarily be signed at all if fuel prices stabilize. This is all very secondhand and speculative at the moment, so watch this space.

Background: We had heard from sources last month that the ministries of oil and finance had selected the firm that will provide hedges to the government and that the contracts would be finalized after the next OPEC meeting. The move aims to prevent higher oil prices from further straining the state budget, which assumes an average price of USD 67/bbl. The winning firm had offered to help Egypt hedge against oil futures rising above USD 73/bbl. Seven offers from international banks bidding on the contract were reportedly on the table and under review. We reported on Monday that the Finance Ministry was also pursuing a similar arrangement to hedge against fluctuations in the global prices of wheat and other key commodities.

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