Oil Hedges Go Out of Style as FOMO Grips Drillers Amid $100 Crude
Producers that typically lock up prices don’t want to leave money on the table if crude continues to soar. That shift could have big ramifications.
A pump jack in the Permian Basin.
Photographer: Angus Mordant/BloombergEven before Russia’s invasion of Ukraine sent shockwaves through the oil market, U.S. shale producers—financially fit again and egged on by investors looking for more commodity exposure—had been exiting their price hedges for months.
Now, with oil closing above $100 a barrel every single day this month, the era of shale producers selling a significant share of future output to protect against potential price declines might be over for now, people familiar with the deal flows said. Oil executives, buoyed by the best financial performance in years, are wagering that higher prices are here to stay for at least the foreseeable future as the supply-demand equation fundamentally shifts.