Producer hedging activities (bearish because they involve deferred sales) have increased dramatically in the past two years according to Citigroup, coming to “dominate liquidity over contracts for 12-18 months and putting a limit on the stability of price hikes », even those inspired by real geopolitical risks. “The medium-long term price curve has stabilized, reducing the impact of speculative flows,” say bank analysts.
Shale oil – the eternal phoenix rising from its ashes – has returned to worry about OPEC, which will soon have to revise the agreement on production cuts based on market scenarios that appear more uncertain. Yesterday a rumor spread postponement of the summit of the Opec Plus coalition, set for March 5-6 in Vienna.
The rumors, reported by the Russian agency Tass, were denied by the Minister of Energy Alexandr Novak, who, however, after a few hours lost his job with the resignation of the Russian government: Will continue to fill the interim position, but if the reshuffle included its replacement for the Opec Plus it would be a serious headache. Novak has emerged as the most influential figure in the last few summits and his role has grown even after the “dismissal” of Saudi minister Khalid Al Falih.
OPEC in the January monthly bulletin raised to 2.35 mbg the estimate on the growth of crude oil production in competing countries in 2020: volumes almost double the expected increase in demand (although this too has been raised, to a super-optimist +1.22 mbg). Reason for revisions: “monetary policies which continue to be accommodative, together with an improvement in financial markets”.
The producers in particular will take advantage of the situation. Thanks to hedging they are now more protected in the event of future drops in oil (an aspect that reassures the creditor banks), with the latest boom in bond issues they brought some hay to the farm, restructuring too close “toxic” debts at expiration. Low interest rates also help control default risk.