The Hacienda Hedge?
Shale and frackers do it, so do Airlines and large transport concerns. But the Hacienda Hedge is the worlds largest and mostly concealed oil hedge. Outside of the investment bankers and DB's at GS, Royal Dutch Shell got involved this year. If you don't already know, you might appreciate this Bloomberg retrospective dated April 4th, 2017
This year, at $50-60, the hedge's mentioned above cover any pricing gap below $55 avg. However, even if the spot price drops, they keep pumping, which adds to oversupply. That behavior hinders and retards a supply response, regardless of how precipitous the price decline is.
Those Mexican hedges utilize Asian style options to establish an AVERAGE price, rather than a US style strike price at maturity. The math might want to consider a range built around the $38 Hacienda average and the $55 upstream hedge average.
Aside from asset bubbles whass up? HY junk investors are basing their assumptions on the price of oil, conjoined at the hip. BK accelerating, automotive sales off 2M Yoy, retail problem growing, not just sales, CRE as well, corp earnings EPS decelerating and no higher than they were FIVE YEARS AGO.
Damnit Janet and the Goddamn Liars gonna raise rates by any or all hiking, reduced purchases and outright selling. The best job market in decades, nominal wage increases, which in real inflation terms are negative, not translating into higher spending. Continuing economic contraction, less to spend and lousy consumption growth is behind it all.
Great recovery indeed. However, with sabres rattling to profit the military industrial complex and global oil barons, oil and equity herd gonna spook? Food for thought and out.
"The country earned $6.4 billion in 2015 and $2.7 billion in 2016. For 2017, the jury is still out. Last summer, Mexico spent just above $1 billion buying put options with a floor price of $38 a barrel. If prices stay where they are now, hovering around $50 a barrel, the men from Hacienda won’t make any money, but if prices drop on average below $38 a barrel, they’ll start to. We won’t know the outcome until December."Here's a recap of what happened last year when the Hacienda hit. Something interesting from March 28th.
"In its analysis of 33 of largest upstream companies with hedging programs, Wood Mackenzie found that the companies have added an annualized 648,000 barrels a day of new oil hedges since the fourth quarter of 2016, an increase of 33 percent from the third quarter of the year and more than in any of the previous four quarters…. Most of the new oil derivatives were added at strike prices between $50-$60 a barrel, he added."Last year, the contango caused a lack of VLCC and ULCC's, which were being used as floating storage. To plug their budget financing needs and reduce supply, the Saudis have been shipping at sub market prices to stockpiling China. Both caused shipping rates and oil prices to demonstrate signs of reflation. Mid year, during Hacienda Days, price dropped $7.
This year, at $50-60, the hedge's mentioned above cover any pricing gap below $55 avg. However, even if the spot price drops, they keep pumping, which adds to oversupply. That behavior hinders and retards a supply response, regardless of how precipitous the price decline is.
Those Mexican hedges utilize Asian style options to establish an AVERAGE price, rather than a US style strike price at maturity. The math might want to consider a range built around the $38 Hacienda average and the $55 upstream hedge average.
Aside from asset bubbles whass up? HY junk investors are basing their assumptions on the price of oil, conjoined at the hip. BK accelerating, automotive sales off 2M Yoy, retail problem growing, not just sales, CRE as well, corp earnings EPS decelerating and no higher than they were FIVE YEARS AGO.
Damnit Janet and the Goddamn Liars gonna raise rates by any or all hiking, reduced purchases and outright selling. The best job market in decades, nominal wage increases, which in real inflation terms are negative, not translating into higher spending. Continuing economic contraction, less to spend and lousy consumption growth is behind it all.
Great recovery indeed. However, with sabres rattling to profit the military industrial complex and global oil barons, oil and equity herd gonna spook? Food for thought and out.
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