US shale oil companies are hedging against future price drops, as West Texas Intermediate enjoys a return of more than $ 50 a barrel, Reuters reported, citing unnamed sources.
Crude oil prices recovered slowly in the last quarter of last year and rose sharply earlier this month as vaccine launches advanced, albeit slowly, in the United States and Europe. At the same time, Saudi Arabia came as a pleasant surprise to the oil markets, stating that it will reduce another 1 million bpd of its production, in addition to the reductions agreed with OPEC +.
As a result, the WTI reached its highest level since February last year, trading at over $ 52 a barrel at the time of writing. Crude brent returned to over $ 55 a barrel.
According to the Reuters report, short positions in oil futures contracts and open options by producers have risen since last autumn, reaching a five-month high in mid-December. It may have continued to rise this month as oil benchmarks continued to improve.
Optimism is growing in the industry, according to Reuters sources, who said some shale producers are waiting for prices to rise further before blocking production on the market.
“Some of them (producers) are pretty much divided between coverage at a level they would have killed six months ago and their constant optimistic nature,” Steve Sinos, vice president of Mercatus Energy consulting, told Reuters.
Meanwhile, production growth in the shale area is unlikely in the short term, according to forecasters and the industry itself. Despite optimism, perpetual or temporary, shale companies are wary of another price drop, despite OPEC + reductions and are taking a cautious stance. At the moment, they are focusing on free cash flow, Reuters sources said.
By Irina Slav for Oilprice.com
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