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The Fundamentals of Oil & Gas Hedging - Costless Collars

  
  
  

This post is the fourth in a series where we are exploring (no pun intended) how oil and gas producers can hedge their exposure to crude oil, natural gas and NGL prices. The first three posts addressed how oil and gas producers can hedge with futures, swaps and put options.  

The Fundamentals of Oil & Gas Hedging - Updated

  
  
  

While the basic fundamentals of energy hedging and risk management don't change very often, the prices at which one can hedge clearly do. As such, we have decided that it would be prudent to update many our older posts which explore the basic energy hedging strategies available to consumers, producers, marketers, refiners and traders, so that they better reflect current market conditions.

The Fundamentals of Oil & Gas Hedging - Put Options

  
  
  

This post is the third in a series where we are exploring how oil and gas producers can hedge their exposure to crude oil, natural gas and NGL prices. The first two posts explored how oil and gas producers can hedge with futures (The Fundamentals of Oil & Gas Hedging - Futures) and swaps (The Fundamentals of Oil & Gas Hedging - Swaps), while this post will focus on how oil and gas producers can hedge with put options. In subsequent posts we'll explore how oil and gas producers can hedge with costless collars and other advanced strategies.

The Fundamentals of Oil & Gas Hedging - Swaps

  
  
  

This post is the second in a series exploring common strategies which can be used by oil and gas producers to hedge their exposure to crude oil, natural gas and NGL prices. You can access the first post via the following link: The Fundamentals of Oil & Gas Hedging - Futures. In subsequent posts we'll explore how oil and gas producers can hedge with options and more complex strategies.

The Fundamentals of Oil & Gas Hedging - Futures

  
  
  

This post is the first in a series where we will be exploring the most common strategies used by oil and gas producers to hedge their exposure to crude oil, natural gas and NGL prices.  

March 2015 Oil & Gas Hedging Update

  
  
  

As many months of declining prices, forward crude oil and refined products across the world have reversed course and increased since our February update. Since our last update, one year forward prices for Dubai crude oil have led the complex higher, up 15.16% month-over-month while Brent, LLS and WTI have increased 13.78%, 9.27% and 7.04%, respectively. On a year-over-year basis, the one year forward curves for WTI, Brent and Dubai are lower by 40.78%, 37.34% and 38.62% respectively.

Singapore & Houston - Energy Trading & Risk Management Seminars

  
  
  

Due to the continued popularity of our energy hedging, risk management and trading seminars, we are announcing two additional seminars which will be held in Singapore and Houston. As seats for both seminars are limited we recommend registering as soon as possible.

Energy Hedging - Better to be Lucky than Good?

  
  
  

You often hear people say, “It’s better to be lucky than good.” I go the exact opposite direction – Luck has the ability to hide bad management decisions. Going one-step further, bad decisions which lead to good results are often failures of management. This rings very true in the energy industry and is especially common when it comes to hedging decisions.

Crude Oil Hedging in An Uncertain Environment - $30 or $200

  
  
  

WTI has traded in a volatile range lately, as have Brent and all other grades of crude oil. The prompt WTI crude oil contract lost more than 8% of its value (Feb 3 close = $53.05, Feb 4 close = 48.45, change = -$4.60/bbl) on a single day last week. Such volatility is great for news agencies that write stories about extreme price movements, often accompanied by sensational quotes from market participants. For example, CNN Money used a quote from OPEC Secretary General Abdulla al-Badri to write the headline: “OPEC leader: Oil could shoot back to $200.” To paraphrase, Mr. al-Badri does not believe oil prices will fall any lower. He cites falling CapEx and rig counts, going so far as to say there is risk that oil producers may over react, resulting in under investment in oil supply, subsequently resulting in a tighter, maybe under-supplied, oil market. He uses $200 as the result of an extreme case of lost investment combined with the natural decline of existing production. As an aside, a recent Bloomberg article summed up the current market uncertainty quite well - These Experts Know Exactly Where Oil Prices Are Headed - Somewhere Between $30 and $200 a Barrel

February 2015 Oil & Gas Hedging Update

  
  
  

As has been the theme for many months now, forward crude oil and refined products across the world have continued to decline since our last update, with a few exceptions in RBOB gasoline and USGC, Singapore and NWE fuel oil. Since our January update, one year forward prices for Dubai crude oil have once again led the complex lower, down 5.62% month-over-month, and have been closely followed by Brent, WTI and LLS which have declined 4.81%, 4.43% and 4.24%, respectively. On a year-over-year basis, the one year forward curves for WTI, Brent and Dubai have declined by 44.67%, 44.93% and 45.80% respectively.

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