NEW YORK: OPEC’s sudden disarray would seem to be an opportunity for US shale producers to lock in profits, with oil prices near multi-year-highs, but sources at those companies say they are not taking chances with the market’s volatility.
Shale producers are famous for boosting output whenever oil prices surge. However, the shale industry has been notably restrained so far this year even as oil surged past $70 a barrel. They have maintained a lower level of production after vowing to investors that they would hold the line on spending to boost returns.
Oil prices are above $73 a barrel, near three-year-highs. On Monday, the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, were unable to reach an agreement on returning supply to the market. That could push oil higher, though on Tuesday prices fell with investors worried that without an agreement, OPEC+ members could open the taps, which would pressure prices.
Shale companies have been actively hedging this year, to lock in prices that protect profits if prices slump.
Yet hedges can be costly, prompting writedowns if oil prices rally past levels producers have locked in. A group of 53 oil producers tracked by consultancy Wood Mackenzie have combined losses of $3.2 billion in the first quarter on hedge contracts.
Just 12 of 40 operators with 2021 oil hedges had an average hedge price above $50 a barrel, according to the firm.
“With every bank saying that oil will be at $90-$100, no one is going to put hedges on right now,” said an executive at a shale oil producer, who agreed to speak on the condition of anonymity.
The group tracked by WoodMac has hedged about 32 percent of expected 2021 production volumes, less than at the same time a year ago. WoodMac said producers were more likely to keep their remaining 2021 production unhedged, sell at the current prices, and focus their hedges on 2022 instead. Shale firms also have pledged to keep production flat, boosting investor returns rather than pumping more crude.
“I don’t see any signals from any of these producers that they are going to grow production anytime soon ... you could be adding hedges but it doesn’t necessarily mean that you’re going to grow production next year,” said Alex Beeker, a principal analyst at Wood Mackenzie.
Shareholder pressure to increase returns make this cycle different, analysts said.
Hedging provides a way for producers to avoid risk, but “that is not what shareholders want,” said oil analyst Paul Sankey. Investors who are putting money into producers want exposure to higher oil prices, he said.
Companies would first need to get investors on board with the plan before hedging more since they have pledged not to expand production, an executive at another shale producer said. Hedging can provide the financial wherewithal to increase output.
“For us public producers, everything takes time,” he said.
US shale firms hesitate to pump — or hedge — more, despite oil high prices
https://arab.news/mtrxb
US shale firms hesitate to pump — or hedge — more, despite oil high prices
- Oil prices are above $73 a barrel, near three-year-highs
- Shale producers are famous for boosting output whenever oil prices surge
Over 150 Chinese investors seek Saudi partnerships in petrochemicals, plastics, and printing
RIYADH: More than 150 Chinese investors in the petrochemicals, plastics, and printing sectors are seeking strategic partnership opportunities with their Saudi counterparts, aiming to localize specialized industries and boost investment flows.
Over three days, Dammam is hosting a new edition of the Gulf 4P International Exhibition for Plastics, Printing, Packaging, and Petrochemicals at the Dhahran International Exhibitions Center. The exhibition continues its position as one of the largest specialized industrial and commercial platforms in the region, according to Al-Eqtisadiah.
Following the exhibition’s inauguration, Hamad Homoud Al-Hammad, chairman of the National Contracting Committee at the Federation of Saudi Chambers, stated: “Through strategic support, the availability of raw materials, and the existence of infrastructure, Saudi Arabia has managed to become the largest plastic industry in the Middle East, supported by a consumer base both domestically and externally.”
Al-Hammad explained that estimates indicate that demand for plastic products is set to grow by more than $3 billion in the coming years, opening wide horizons for promising investment opportunities.
He pointed out that the exhibition represents an opportunity for suppliers, investors, and manufacturers to gather to enhance partnership opportunities and exchange knowledge and technology, thanks to the broad participation from international and local companies.
The exhibition also contributes to cementing Saudi Arabia’s position as a globally attractive destination for advanced industries, especially in the plastics, printing, and petrochemicals sectors.
Significant growth in sector-related markets
For his part, Mshari Al-Kuwaiflie, Regional Director of MIE Events, the exhibition organizer, told Al-Eqtisadiah that the Chinese companies and factories participating in the exhibition are opening wide horizons for Saudi investors to build commercial and investment partnerships.
They will be able to learn about the latest technologies in packaging, printing, plastic manufacturing, and petrochemicals, especially since the market in the Kingdom is witnessing accelerated growth in these sectors.
He clarified that the value of the packaging market in Saudi Arabia exceeded $2 billion in 2021, with expectations to reach $2.6 billion by 2027.
According to estimates from exhibition participants, the plastic packaging market is estimated at about $8.59 billion in 2025, poised to rise to more than $10 billion by 2030. The value of the printing market in 2023 reached about $1.435 billion, with expectations to exceed $1.871 billion by 2030.
Al-Kuwaiflie said: “The numbers demonstrate that there are promising and available investment opportunities that can form a solid foundation for launching commercial and investment partnerships between the participating Chinese companies and factories and Saudi companies, especially in sectors related to transformative industries amid a broad industrial transformation witnessed by Saudi Arabia, which is the largest in the Gulf in the printing, packaging, and plastics sectors.”
An international platform for manufacturers and suppliers
The exhibition, which witnessed participation from factories from Turkiye, India, and other countries, offers extensive displays of the latest industrial innovations and technologies in petrochemicals, plastics, and packaging, in addition to industrial equipment, construction and building sectors, and conditioning systems.
The exhibition’s program also includes business sessions and direct meetings between companies, buyers, and decision-makers, along with a dedicated B2B platform for coordinating meetings between investors and exhibitors.
This is with the participation of trade delegations from Saudi Arabia, the Gulf, Asia, and Europe, aiming to build new international partnerships that contribute to enhancing a diversified economy based on knowledge and modern technologies, in line with the objectives of Saudi Vision 2030.
