U.S. slate oil companies are hedging against future price drops as West Texas Intermediate enjoys a rise above $ 50 a barrel, Reuters reported, citing unknown sources.
Crude oil prices had recovered slowly over the last quarter of last year and jumped sharply earlier this month as vaccine implementation progressed, albeit slowly, in the United States and Europe. At the same time, Saudi Arabia came as a pleasant surprise to the oil markets by declaring that it would cut an additional one million barrels per day of its production in addition to the cuts agreed with OPEC +.
As a result, WTI reached its highest point since February last year, trading at more than $ 52 a barrel at the time of writing. Brent crude rebounded above $ 55 a barrel.
According to the Reuters report, short positions in oil contracts in the futures and options market opened by producers have risen since last autumn and reached a maximum of five months in mid-December. They may have continued to rise this month as oil benchmarks continue to improve.
Optimism is growing in the industry, according to Reuters sources, who said some shale producers expect prices to rise further before blocking production in the market.
“Some of them (producers) are pretty much divided between coverage at a level they would have killed six months ago and their always optimistic nature,” Steve Sinos, vice president of consulting firm Mercatus Energy, told Reuters.
Meanwhile, growth in shale foot production is unlikely in the short term, according to forecasts and the industry itself. Despite the optimism, perpetual or temporary, slate companies are wary of another fall in prices, despite the cuts in OPEC + and adopt a prudent stance. For now, they are focusing on free cash flow, Reuters sources also said.
By Irina Slav for Oilprice.com
More highlights from Oilprice.com: