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5 part thread incoming on OIL
lets talk about oil hedges for a minute
So when producers hedge (meaning they are trying to offset adverse moves in the market place by locking in a price, btw this is no different from other commodities)
lets talk about oil hedges for a minute
So when producers hedge (meaning they are trying to offset adverse moves in the market place by locking in a price, btw this is no different from other commodities)
This year, oil hedging has been at a low, in part due to the largest hedger, Mexico, but others as well. The risk to oil prices is that they start hedging. So you ask..what does that mean to me?
When oil producers hedge, they generally do it via options (collars or costless collars and they go to the banks for this to provide a market) Now, the banks take the long side of their (oil cos) short options positions, they (banks) offset their risk by selling the futures
So if we look at the last week and the week before price action, now that we know $OXY was hedging, this is what price action looks like when hedging occurs ..generally
What I think happened today, IMO, is there was a hedging program going on and price action was further exacerbated by outside factors (10% additional China tariffs tweet). In other words, everyone jumped on the short train at the same time, thereby exacerbating the oil move today
