Back to the complete issue
Sunday, 16 February 2020

Egypt hedged against rising oil prices this year, Maait confirms

Egypt hedged against rising oil prices this year, Maait confirms: Egypt took out hedging contracts to guard against rising oil prices during the current fiscal year, Finance Minister Mohamed Maait confirmed in an interview with Bloomberg. The government hedged “several times” this year and “will hedge again during the year if needed,” the minister said on the sidelines of the Egypt Petroleum Show last week. The minister said at the start of the fiscal year that the government was considering going back to the market but nothing has been heard since. This is the second consecutive year Egypt has hedged against oil market volatility after reportedly buying call options (a derivative contract that protects against rising prices by fixing the rate for specified period of time) from Citibank and JPMorgan in FY2018-2019.

Further hedging won’t be needed on current evidence as the coronavirus takes its toll on the oil markets. The International Energy Agency last week projected demand growth to slow to rates not seen since 2011 as consumption in China suffers under the weight of the coronavirus outbreak. The price of Brent has already fallen from just under USD 69/bbl to a low of USD 53/bbl since the start of the year, well under the USD 68/bbl average price the government used for its FY2019-2020 budget. Goldman Sachs last week said it sees the price remaining at around USD 53 until the end of the year due to the loss of around 4 mn bbl/d of Chinese consumption.

Egypt considering grain hedging: Maait said that the government was considering taking action to protect itself against rising grain prices, an option that has been floated before due to Egypt’s heavy dependence on wheat imports. Wheat is currently trading at USD 212 per metric ton, slightly under the USD 214 price assumed in the state budget.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.