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Increased Oil Hedging Hints At Permian Production Boom

Increased Oil Hedging Hints At Permian Production Boom


Oil hedges have become popular amongst U.S. shale drillers, who have used the financial trick to lock-in higher prices for their raw goods as barrel prices edge higher.

The prices of half of all shale production this year have been locked in using futures contracts. After the fourth quarter, U.S. oil companies increased their hedges to 48 percent, compared to just 30 percent after the third quarter, according to a note by Goldman Sachs.

Protected prices on future production make it easier for drilling to boost output and lower spending, attracting investors to the oil and gas sector.

"We believe the continued rise in 2018 producer hedging facilitates (oil companies') plans for capital discipline, reducing cash flow volatility," Goldman analysts wrote in a client note.

Continued: https://oilprice.com/Energy/Energy-General/Increased-Oil-Hedging-Hints-At-Permian-Production-Boom.html