Last weekend, Bloomberg reported U.S. drillers have dramatically reduced their hedging activity, a move that could portend a break in the production gains that
have upended global crude prices.
The relative cost of options protecting against a drop in West Texas Intermediate crude has fallen to its lowest since August, thanks to a big drop in producer hedging.
Hedging contracts lock in payments for future production. U.S. drillers
signed onto such agreements in droves late last year, after an OPEC-led
deal to cut output raised prices. The Catch-22 is that the guarantees
gave drillers the security to boost output, undercutting the rally. Now,
futures have languished to the point that the industry’s favorite
financial safeguard no longer makes economic sense.
More news, U.S. Shale's Favorite Financial Trick Is Getting Less Attractive
Source :
1) www.bloomberg.com
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