While the entire financial world is watching is not very successful negotiations with OPEC to stabilize prices, the American manufacturers are not wasting any time and are hedging for the next year.
A month ago, many experts argued that the statements of the countries-participants of OPEC to a tentative agreement on limiting the volume of oil no more than a farce, well, or nothing more than a banal verbal intervention. Now, such statements seem more and more like the truth. Indeed, reduce or restrict production wishing to almost none, and all are finding this quite good reason.
Iraq, for example, laments the fact that he is at war with terrorists and he needs to get as much as possible. Iran refuses to talk about any measures to limit, until you reach production levels of 4 million barrels per day. By the way, Saudi Arabia, which initiated the recent negotiations, their task is partly fulfilled. It is unlikely to have occurred by chance, but nevertheless, the Saudis have placed bonds in the amount of $ 18 billion in fact, at the peak of oil prices, thereby ensuring high demand and relatively low yield.
Recall that, according to generally accepted information, in 2014 Saudi Arabia began to increase its production volumes in order to remove from the market of independent producers with high production costs. Partly this task was achieved, but only partly.
Indeed, there was a strong decrease in the number of drilling rigs in the U.S., as well as a significant reduction in production. Moreover, many companies reduced investment. In particular, on the reduction of investments in major projects last week, ConocoPhillips said.
But it also said that other oil companies just do not expect growth in oil prices above, say, $ 60 per barrel. Moreover, not the fact that next year will not be a significant increase in production in the United States.
For several months in the U.S. there is almost continuous increase in the number of drilling rigs. But the most important thing is not even that, but the fact that kancevica does not sit around and expect that oil prices will suddenly rise: they are massively hedge (insure) their risks at current levels, which will allow them to turn a profit next year, of course, if the financing will not have problems.
According to EIA, the number of short positions in WTI crude held by producers and wholesalers of oil is near record levels over the past 10 years.
The amount of short positions that are opened by these market participants rose to 540 thousand, and this is the maximum since 2007.
Recall that last year, banks have tightened requirements for producers, requiring them to hedge the price and only provided that they are willing to Fund projects. But by kancevica so convenient: they sell far contracts, which are more expensive than the next, go to banks, show that they have the counterparty’s obligation to buy their oil at a reasonable price, get money and start working.
Thus, the OPEC countries in case of inactivity will remain in a losing situation. If they do not agree, prices will go down and Saudi Arabia with their colleagues will produce and sell at a low price, and American kancevica the decline in oil prices will be indifferent, as they will still sell the same price. (However, in fairness, it can be noted that Russia does not seek to cut oil production, but says only about the freezing of the volumes at the current levels, which ultimately desorientiert world oil market).
