Oil producers lock in 2026 hedges after crude spikes on Iran conflict
(Bloomberg) – Oil producers jumped on a chance to lock in prices for future sales as the crude market soared by the most since June, opening a window that had been scarce before the U.S. and Israel launched strikes on OPEC member Iran.
Nearly a quarter of AEGIS Hedging Solutions LLC’s oil-focused clients were on standby for the 6 p.m. ET market open on Sunday, according to the firm, which helps about 350 oil producers with hedging. Some were ready with limit orders, when buyers and sellers set specific price levels for trades, while others queued up transactions to be executed Monday morning.
“It’s still intense,” Aegis President Matt Marshall said in an interview. His team worked through the weekend, with the trading manager canceling travel plans to stay at the desk.
Oil prices skyrocketed by as much as 12% when markets opened in Asia after a nightmare scenario for traders unfolded when shipping flows through the vital Strait of Hormuz ground to a halt. The rally offered oil producers an opportunity to lock in prices for future sales using derivatives such as options and swaps that allow the holder to sell at a predetermined level.
The surge of hedging activity came at the end of a relatively quiet February, with producers largely sitting out price rallies, Marshall said. Drillers had already engaged in record hedging with a flurry of activity in January before prices crashed.
Given the hedging levels earlier this year, some producers may need to extend their 2026 hedging programs further into the future to lock in prices this time around, according to AEGIS. Typically, oil drillers lock in prices for the upcoming year.
The vast majority of deals involved swap contracts because they can be more quickly executed than collar structures involving put and call options, Marshall said.
The rise in activity also contributed to steepening backwardation in the futures curve as producers sold deferred contracts, widening the gap between short-term prices and those in the future, he added.
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