XTO energy has hedged 95% of their 2010 oil production. Is that a good or bad?
Answers
2082 points
alanj answered 4 months ago …
I believe that this is standard procedure for all commodities related companies, so that they will lock in profits. Hedging is like insurance against losses. Will it turn out good or bad? It would depend on what the price was when they hedged. If they hedged (bought 2010 put options or sold their 2010 production) when the prices where extremely high this would be extremely good for the company, they would have locked in their 2010 production at a high selling price.
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JSIMMER answered 3 months ago …
Did they hedge at $147, $70 or $40. Find out where they hedged and you'll get your answer. Anything higher than the spot price is better
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108 points
fido399 answered 2 months ago …
Mainly I think this is misleading since XTO is involved in both crude and natural gas.Best I can tell they aren't shorting crude but are rightly shorting natural gas.
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3943 points
MNSL answered 2 months ago …
I think we will have volatility in the oil market in 2010. Some will lose and some will gain.
Globally many banks, airlines and other industries lost heavily by hedging oil and some will lose more in the future and some will gain depend on their experience, knowledge and ability to hedge correctly.
Some oil expert think oil will come down to $50 during next four months before it rebound again.
I found another article recently. We have to wait and see.
http://www.bloomberg.com/apps/news?pid=20601087&sid=auTu3RI8WC1A
Verleger Sees $20 Oil This Year on ‘Devastating’ Glut (Update1)
July 16 (Bloomberg) -- Crude oil will collapse to $20 a barrel this year as the recession takes a deeper toll on fuel demand, according to academic and former U.S. government adviser Philip Verleger.
A crude surplus of 100 million barrels will accumulate by the end of the year, straining global storage capacity and sending prices to a seven-year low, said Verleger, who correctly predicted in 2007 that prices were set to exceed $100. Supply is outpacing demand by about 1 million barrels a day, he said
