Publications: Notes at the Margin

Producers Need Longs (May 8, 2017)


The route began Thursday, May 4. WTI prices began at $47.70 per barrel and settled at $45.50. The $2.10 drop was bad enough. However, prices plummeted another $2 overnight. This "mini-Minsky moment" could not have occurred at a worse time because the independent producers driving the development of US shale were just beginning hedge their 2018 production. Independent producers are under pressure to hedge 2018 output in order to obtain further financing. Banks can lend to oil and gas exploration only if the borrowers have adequate collateral. In most cases, the collateral can only be obtained through hedging. This week's report provides the details and discusses the crude oil price implications.


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