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U.S. 2018 oil producer hedging above normal levels: Goldman Sachs

2018-03-14 03:00    Investing

U.S. 2018 oil producer hedging above normal levels: Goldman Sachs Commodity News

© Reuters. FILE PHOTO - A pump jack used to help lift crude oil from a well in South Texas’ Eagle Ford Shale formation stands idle in Dewitt County Texas

(Reuters) - Oil producers in United States have continued to add to their hedge positions for 2018, which has surpassed the historical averages due to an increase in oil futures prices, Goldman Sachs (NYSE:GS) said in a note on Tuesday.

The U.S. producers that Goldman tracks have increased their oil hedges for 2018 to 48 percent, according to the companies' fourth quarter results. That is up from the 30 percent for third quarter, Goldman said.

Most U.S. exploration and production companies are hedged between $50-$60 per barrel for 2018, below Goldman's $72.50 per barrel oil price forecast, it said.

"We believe producers may continue to tactically add oil hedges at current futures to mitigate oil price volatility in 2018, and have seen producers begin to add 2019 hedges," the investment bank said.

Producers have hedged about 9 percent of next year's oil production at an average price of about $58 a barrel, Goldman said.

U.S. crude futures (CLc1) have averaged near $63 per barrel so far this year. That compares with an annual average of $50.85 in 2017 and $43.47 in 2016.

Natural gas hedging for 2018, meanwhile, was at 47 percent, slightly above the five-year seasonal average of 44 percent, Goldman said.

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