Morgan Stanley says hedging may be highest so far this year
OPEC effectively threw ‘lifeline’ to shale producers, BNP says
Independent oil companies are using the post-OPEC rally to hedge their price risk for next year, banks and consultants said, a trend that’s likely to be viewed with concern from Saudi Arabia to Venezuela.
The clamor to hedge — locking in future cash flows and sales prices — could translate into higher U.S. oil production next year, offsetting an output cut that the Organization of Petroleum Exporting Countries outlined in Algiers last week. Shale firms in particular would enjoy extra income to pay for additional drilling.
“We are seeing significant producer flows which early estimates suggest could be the highest we have seen all year,” Adam Longson, commodity strategist at Morgan Stanley in New York said in a note to clients. Read More…