Opec ‘gets a pass to lift oil prices’ as hedging losses hobble US shale

Opec ‘gets a pass to lift oil prices’ as hedging losses hobble US shale

Some of America's biggest oil groups are racking up tens of billions of dollars in hedging losses despite soaring crude prices, as contracts signed during last year's crash leave them selling their output at deeply discounted prices.

Oil is trading near six-year highs of around $75 a barrel, but almost a third of the US's 11m barrels a day of production is being sold for just $55 a barrel, according to IHS Markit, a consultancy.

The figures will offer comfort to the Opec cartel that rallying prices are not about to spark another market-busting surge in American shale production.

"Opec gets a pass to keep lifting prices right now if it wants to, without fearing much of a US supply response," said Bill Farren-Price, an analyst at Enverus. "Shale producers are locked into selling their oil cheaply this year."

IHS Markit said US oil hedging losses in the first half of 2021 had already hit $7.5bn, but would rise by another $12bn if crude remained at $75 a barrel until the end of the year. Many Wall Street forecasts suggest it could go higher.

Last week a political spat between Saudi Arabia and the United Arab Emirates left the Opec cartel unable to agree on