U.S. Shale Producers Increase 2017 Hedging After Bump in WTI

There are several reports floating around, discussing the ‘clamor’ to hedge WTI near $50. Each time WTI nears $50, a wild group of desperate, near insolvent, shale producers step into the market, ironically, with millions of dollars to hedge their 2017 production. By doing this, they ensure a genteel, profitless, business for another calendar year — but one without having to declare bankruptcy.

“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.

Crude futures surged by almost $5 a barrel since OPEC surprised traders by agreeing to trim output at a gathering in Algiers on Sept. 28.
Harry Tchilinguirian, head of commodity research at BNP Paribas SA in London, said on Friday that OPEC had thrown a “lifeline” to U.S. shale firms, prompting them to hedge “in droves.” The bank has “seen many queries coming through” from producers, he said.

In spite of these reports that depict half disheveled multi millionaire oil men, ‘clamoring’ to hedge production, according to Tudor Pickering, just 16% of production is hedged for 2017 –compared to 39% for 2016. Clearly, and this goes without saying, there’s going to be a lot more clamoring if the fuckers in the oil patch want to remain halfway insolvent throughout the next calendar year.

Based on CME data found available on the interwaves, there was a 10% spike in the WTI June 2017 contracts and a 6.5% jump in the December 2018s.

So much fucking clamoring.