Last year, with oil & gas prices hitting multi-year highs, producers that typically lock up prices preferred to hedge only lightly, or not at all. Meanwhile, hedge ratios remain low with the '23 figure at 21.2%, while the ratio for '24 output is just 5.2%
s. During times of falling crude prices, oil producers normally use a short hedge to lock in oil prices if they believe prices are likely to go even lower in the future.
Back in November, Standard Chartered reported that the U.S. oil hedge book was less than a fifth of the Q1-2020 peak of 563mb. Now the commodity traders have provided an update and revealed that producers are still showing little appetite for this type of insurance despite wild swings in oil prices. StanChart has revealed that there has been no significant rebound in oil hedging by U.S.
As Paul Cheng, an analyst at Scotiabank, has told Bloomberg, the best hedge for oil and gas companies is a strong balance sheet.Management teams have greater FOMO, or fear of missing out, being hedged in a runaway market.
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