Lately, the United States shale producers got the advantage from oil market rally which was not seen before. It was especially in a year. That situation was done by locking the price for further trading. It was stated by a trusted source.
The position and move of this commodity are still not so stable. Based on the data, the US raw oil price this month is increasing above $50 per barrel moves to its highest level since one year ago.
That condition really triggers optimism amid the shale companies. However, a lot of people knew that the demand for oil was totally broken in for about 12 months. It means that many parties are still not ready to increase the production of this liquid.
Future Oil Rally Triggers Optimism
The USA future oil this month is increasing. The amount is more than $50 per barrel. It is for sure that this situation triggers optimism for shale enterprises. Then they purchased and then sold the contract in the shale market
They also did the same thing for an option which is usually called value protection. It is usually known to secure the cash flow for further selling. That is quite common in the trading industry.
The oil production in the United States was increasing and touching its peak. The total amount at that time was almost 13 million barrels per day at the end of 2019. However, now the production has been cut based on the situation.
Now, that country is just producing about 11 million barrels per day. The cause is the lockdown rules which are applied by several countries worldwide to stop the spread of coronavirus. It has a wide impact globally.
Lockdown and Its Impact
The lockdown decision makes the oil demand decrease and its price is slipped. Many people predicted that production will not arise in 2021. However, those who are protected by the present value may give a higher price.
That can be more than $50 per barrel. With the price available today, the companies which are in the right area could do their business better. There are several things that changed and happened during the fall season. What are they?
Those are the short position of producers in a futures contract and the US raw oil option. They reached the highest level in the middle of December. In 2020, more than 40 exploration & production enterprises in North America stated their bankruptcy.
Meanwhile, some others decided to join for reducing the debt. Investors then pressed the shale companies to control their expenses and to increase their returns. That was started even before the corona pandemic. This year could be about a free cash flow.
The Decision Was Taken By Some Companies
Those with the value protection are possible to lock 15% - 20% at the same time. The rest delay this thing since they want to anticipate the price which may increase again. It may become $60 - $65 per barrel.
The Brent raw oil which now is at $57 can rise again and touch the position of $65 per barrel in the hot season this year. Commonly, they are separated between the value protection that they ‘killed’ 6 months ago or their optimistic attitude.
Mostly, the US raw oil prices in 2021 have been up for more than $52. That becomes the peak position since February. The time spread of the American raw oil can be used as a sign of the value protection increase.
The Prix of this commodity for December 2021 has been up and higher than $2.80 per barrel. That is above the 2022 delivery this week. It becomes a common sign that producers sell the contracts to fund their 2021 value protection.
