Global Stock Markets
More than 144 million barrels were added to hedges, after global oil
markets LCOc1 rallied by as much as $13 in the quarter. Higher prices
help producers lock in profits for future sales.
That should guarantee that total production exceeds 10 million bpd in 2018, which would be an all-time record for U.S. drilling. Traders say growth next year will likely exceed government forecasts, heralding a record year that could pressure prices in the near term.
For oil traders, hedging data from shale companies serves as a leading indicator of future supplies.
In total, 17 companies increased outstanding oil options, swaps or other derivatives positions by 144 million barrels between the second and third quarter. Another 10 companies decreased their hedging positions by 31 million barrels; three others did not hedge at all.
Together, the companies have nearly one-third more barrels hedged, or the equivalent of 129 million barrels, compared to the previous quarter.
Citigroup analysts said the third-quarter hedge ratio - the percentage of production where shale companies have locked in future sales - for 2018 jumped from 12 percent to 27 percent. For the same period in 2015 and 2016, producers had locked in 15 and 18 percent of the coming year, they said.
Several firms, including Hess Corp (HES.N), Newfield Exploration Co (NFX.N) and Marathon Oil Corp (MRO.N) loaded up their hedges, and more than doubled volumes last quarter. Together, they added 74 million barrels. Among the companies that rolled off the most include Anadarko Petroleum Corp (APC.N) and EP Energy (EPE.N).
Shale firms are said to have continued adding to hedges in the fourth quarter. Swap dealer gross shorts data from the Commodity Futures Trading Commission [3067651SSHT], an indicator of producer hedging activity, touched a record in the most recent week.
Last week, a Texas-based producer was said to have hedged some 30,000 barrels per day (bpd) for 2018 in U.S. crude futures, according to two sources familiar with money flows.
U.S total oil production is expected to rise by 780,000 bpd to 10.02 million bpd next year, which would be a new annual record, according to the U.S. Energy Information Administration (EIA).
Traders estimate that growth could be as high as 1.2 million bpd, with at least 500,000 bpd to 600,000 bpd out of Texas’s prolific Permian basin alone.
That could complicate an extension by OPEC to curb global supplies through 2018 to keep prices low.
Drilled but uncompleted wells rose for a 12th straight month to a record in November, according to EIA data dating to December 2013.
Despite greater levels of hedging, and the rise in production, the U.S. crude forward curve remains in backwardation, a market structure where near-term prices are higher than those in the future.
On Wednesday, WTI for December 2019 was trading around $2.46 a barrel over WTI for December 2018 CLZ8-Z9. That spread, a popular trade, signals the health of the oil market.
That should guarantee that total production exceeds 10 million bpd in 2018, which would be an all-time record for U.S. drilling. Traders say growth next year will likely exceed government forecasts, heralding a record year that could pressure prices in the near term.
For oil traders, hedging data from shale companies serves as a leading indicator of future supplies.
In total, 17 companies increased outstanding oil options, swaps or other derivatives positions by 144 million barrels between the second and third quarter. Another 10 companies decreased their hedging positions by 31 million barrels; three others did not hedge at all.
Together, the companies have nearly one-third more barrels hedged, or the equivalent of 129 million barrels, compared to the previous quarter.
Citigroup analysts said the third-quarter hedge ratio - the percentage of production where shale companies have locked in future sales - for 2018 jumped from 12 percent to 27 percent. For the same period in 2015 and 2016, producers had locked in 15 and 18 percent of the coming year, they said.
Several firms, including Hess Corp (HES.N), Newfield Exploration Co (NFX.N) and Marathon Oil Corp (MRO.N) loaded up their hedges, and more than doubled volumes last quarter. Together, they added 74 million barrels. Among the companies that rolled off the most include Anadarko Petroleum Corp (APC.N) and EP Energy (EPE.N).
Shale firms are said to have continued adding to hedges in the fourth quarter. Swap dealer gross shorts data from the Commodity Futures Trading Commission [3067651SSHT], an indicator of producer hedging activity, touched a record in the most recent week.
Last week, a Texas-based producer was said to have hedged some 30,000 barrels per day (bpd) for 2018 in U.S. crude futures, according to two sources familiar with money flows.
U.S total oil production is expected to rise by 780,000 bpd to 10.02 million bpd next year, which would be a new annual record, according to the U.S. Energy Information Administration (EIA).
Traders estimate that growth could be as high as 1.2 million bpd, with at least 500,000 bpd to 600,000 bpd out of Texas’s prolific Permian basin alone.
That could complicate an extension by OPEC to curb global supplies through 2018 to keep prices low.
Drilled but uncompleted wells rose for a 12th straight month to a record in November, according to EIA data dating to December 2013.
Despite greater levels of hedging, and the rise in production, the U.S. crude forward curve remains in backwardation, a market structure where near-term prices are higher than those in the future.
On Wednesday, WTI for December 2019 was trading around $2.46 a barrel over WTI for December 2018 CLZ8-Z9. That spread, a popular trade, signals the health of the oil market.
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