UPDATE 1-Mexico nearly ready with formula for billion-dollar oil hedge -official

-official@ (Adds quote, details on the hedge, background)

MEXICO CITY/NEW YORK, June 28 (Reuters) - Mexico has nearly finished reworking the formula it uses to hedge its oil production, a finance ministry official said on Friday, including changes to how it factors fuel oil prices into its export mix.

"We have the formula, and we'll be making it official soon," said Gabriel Yorio, a senior finance ministry official. "We have it practically ready."

Mexico buys about $1 billion worth of financial positions to protect its oil sales revenues for the coming year against price volatility.

The formula is one of the last pieces Mexico needs to approach banks to solicit quotes for the crude oil options it typically buys to protect against a drop in oil prices, sources familiar with the deal said this week.

The series of transactions are the most widely anticipated in oil markets, and can make or break an investment bank's dealbook.

Mexico has faced challenges in executing the hedge this year as oil prices have been volatile and new International Maritime Organization standards set to come into effect in 2020 have roiled fuel oil markets - a component of its formula.

High-sulfur fuel oil has generally been a component of Mexico's export mix, but brokers and traders have asked the country to replace the type of heavy fuel oil it has been using for calculating the formula for the hedge, sources have told Reuters.

"There are rule changes in the maritime regulation, which imply a new composition of fuels," Yorio said in an interview. (Reporting by Dave Graham in Mexico City and Devika Krishna Kumar in New York; Editing by Tom Brown)

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