US oil producers prepare for 3rd year of low prices despite rally
Hedging has become a critical cash lifeline for companies that have so far survived a bust that has claimed dozens
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OIL producers are not betting on the rally. After surviving two years of low prices, they are gearing up for a third by buying protection against a renewed downturn. Laredo Petroleum Inc said on July 14 that it hedged more than two million barrels of 2017 output earlier this month. Drillers have increased bets on falling prices by 29 per cent this year.
Crude has declined more than 10 per cent since hitting a 2016 peak in early June, stoking fears of another second- half slump. It was July that broke the back of last year's bull-run, with oil plummeting 21 per cent. The prospect of a repeat has drillers doing everything that they can to raise cash, from selling stocks and bonds to adding fresh hedges.
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