NEW YORK (The Street) --With prices of crude oil at fresh five-year lows, investors are wondering when Saudi Arabia might finally cry uncle, cut oil production and reverse the dramatic slide in oil prices.
Yet Mexico, a non-OPEC country and third largest exporter of oil to the U.S. behind Canada and the Saudi Arabia, could have nearly as much near-term influence on oil prices as Saudi Arabia if they cut their own production. Considering that the Mexican peso is tanking and political unrest has escalated in recent weeks, the odds of Mexico moving to lower oil output before the Saudis are increasing by day. And the country has a big incentive to boost oil prices -- lifting the value of assets it's selling in its effort to privatize the state-run petroleum industry.
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Last month the Mexican government cut its 2014 growth forecast after the central bank dimmed the outlook for Latin America's second largest economy. This prompted selling in the Mexican peso which has only accelerated to two-year lows in recent sessions, as oil prices continue to plummet and export revenues decline further.
Interestingly enough, central bank Governor Agustin Carstens pinpointed the state-controlled energy industry as a bright spot to move the country in the right direction economically. However, with the recent 35% slide in crude oil prices, attracting investment may become challenging, something that would further deter Mexico's economic growth.
While the Saudis have the financial means to stomach lower oil prices better than most countries, Mexico's aging energy platform and infrastructure desperately needs crude oil prices to stabilize. In fact, the country enacted an aggressive energy reform bill last December.
The government, led by President Enrique Pena Nieto, also passed its most ambitious energy reform legislation in August in order to break its monopoly on oil and gas assets held by state-controlled PEMEX and attract billions of dollars of foreign investment.
Less than four months later, Mexico has already officially launched a $5 billion energy and infrastructure investment deal with China on top of a $14 billion investment deal that includes a heavy cooperation on energy between the two countries.
These moves show that Mexico is willing to do whatever it takes to explore new strategic energy deals and lower its reliance on the U.S. to import its oil. This also makes the case for cutting production and putting the brakes on the oil price skid even more intriguing.