Jamaica’s central bank has been asked to work with a team at the Ministry of Finance to continue reviewing hedging options and costs after US oil prices crashed to unprecedented lows yesterday.
Finance Minister Dr Nigel Clarke made the announcement as futures in New York ended in negative territory for the first time amid a devastating supply glut that has forced traders to pay others to take the crude off their hands.
Explaining that the Bank of Jamaica is to advise the Government on next steps in a way that maximises returns on taxpayer dollars, Dr Clarke said yesterday’s dramatic fall in price where oil traded at US$1 per barrel before moving into negative territory as global storage capacity is exhausted, is another reminder of the profound uncertainty in the world at this time.
He said over the past few weeks, a small team from the Ministry of Finance has been working with bankers and multilateral partners on the possibility of hedging Jamaica’s future oil supplies.
“The team has been supplied with daily prices of hedging instruments which, needless to say, reflect the significant uncertainty. That is, they have not been cheap,” Dr Clarke said, adding that, had the team rushed the oil transactions based on prices a few weeks ago, Jamaica would have regretted it today.
Yesterday, Agence France Presse ( AFP) reported that US benchmark West Texas Intermediate for May delivery closed at -US$37.63 a barrel.
The futures contract for May closes today, meaning traders who buy and sell the commodity for profit need to find someone to take physical possession of the oil. But with the glut in markets and storage facilities full, buyers were scarce.