Oil Economy Focus Rapid Review
Oil producers use futures contracts to hedge their exposure to production in an effort to protect themselves from losses should the price of U.S. crude fall suddenly. For 2018, about 48 percent of oil production is hedged at an average price of $57 a barrel, and 16 percent of 2019 oil production is hedged at $60 a barrel. Both hedging levels are below current futures contracts prices, which are averaging around $70 for the second half of 2018 and $66 a barrel for 2019. This limits ability to take advantage of a price rally in prices but also protects from price falls.
LINK TO THE SOURCE ARTICLE: Hedging: Trying to compensate for oil price volatility in 2019
