Oil Prices and Mexico's Influence on Oil Prices

Mexico produces about one point seven million barrels of oil a day. Every year it signs off on a contract with some large investment banks. The deal is structured to give mexico the right to sell its oil in the future at a predetermined price. In market parlance, it's a put option. So if the price of oil tumbles below a certain level, then the contract kicks in and the banks have to pay out the difference.