Shale Hedging Revolution Caps Oil Price Below $60

摘要

Extensive US hedging activity is keeping a tight lid on global oil prices, keeping crude benchmarks well below $60 per barrel, if not $55/bbl, for the foreseeable future. Market sources say US shale companies have revolutionized the industry not simply through their production methods. They have also become a dominant force in oil futures markets, employing aggressive hedging strategies that have altered market dynamics and killed off the chances of any serious price rally - to the benefit of the airline industry which uses crude futures to hedge its forward fuel requirement. US airlines have mostly bowed out of fuel hedging while prices remain relatively low, but carriers in Europe and Asia are still happily locking in cheaper fuel bills. Using a variety of financial instruments such as oil futures, swaps and options, shale players are selling future production and locking-in profits for reinvestment. In doing so, the selling activity depresses the oil price and thwarts benchmark price rallies. The volume of US shale hedging is entirely pricedriven, which means a strong flat price rally attracts more aggressive selling. 'If the market hits $55/bbl it would easily invite 50,000-100,000 barrels a day in forward selling,' industry sources commented. 'If the market hits $60/bbl, this would see millions of barrels sold out as far as 2019.' When Saudi Arabia and Russia voiced support for a nine-month extension of the current output agreement on May 15, prices spiked barely $1/bbl as US producers rushed to sell production out to December 2018.