Mexico and oil markets also will keep an eye on Venezuela's presidential elections on Sunday and the possibility that top members of the Organisation of Petroleum Exporting Countries (Opec) could meet next month to discuss oil prices.

"We are carefully watching Opec's steps and a few fundamental events, such as the elections in Venezuela," Tellez told a news conference.

Mexico, which depends on oil for about a third of government revenue, has based its 1999 budget on a forecast that its export crudes will average $11 per barrel next year. But those prices have dipped below $8 recently.Tellez said the government was still sticking with the target for now, despite the recent plunge in world oil prices.

If officialsdecide to readjust the oil estimate for the 1999 budget, they would likely do so in coming weeks while watching global oil prices, a senior government source said.

Non-Opec producer Mexico took centre stage this year, with Opec members Saudi Arabia and Venezuela, to lead a coordinated 3.1 million barrel-per-day (bpd) reduction of the world oil glut.

Prices recovered after the move, which Tellez said saved at least $700 million in government income, assuming prices would have stayed at about $8 lows all year.

But in recent days, prices have fallen to 25-year lows in real terms, adjusted for inflation, for Mexico's three types of export crude, in part because of disappointment that Opec failed to decide on production policy at its meeting last week.

Tellez said Mexico's crude fell as low as $7.60 a barrel in the days following the Opec meeting.

"Next year, we could have a break from (low) oil prices. But for now, it would be irresponsible to give a price for 1999," Tellez said.

He declined to saywhether Mexico would be open to deeper cuts to oil output, as proposed by some Opec members.

But the government source said Mexico could be open to more cuts, so long as other countries also make a serious commitment to paring production.OPEC did not agree at its meeting last week to deepen or extend the cuts from a current deadline of mid-1999 to the end of 1999, as Mexico's Tellez had proposed.

Oil markets have been nervous over the front-running Venezuelan presidential candidate, former coup leader Hugo Chavez.

However, the candidate on Thursday said he backed oil production cuts and full compliance with OPEC cuts. Tellez said he had contact with Chavez aides and has kept close personal contact with other oil ministers.