With Physical Hedging on Rise, Production Response May Weaken With OPEC and non-OPEC production cuts on the horizon (although not guaranteed), institutions exposed to oil have shifted their outlooks for price risk, as reflected in their current positions in NYMEX WTI futures and options. As the WTI forward curve has shifted into backwardation, analysts are calling for swollen inventories to be drawn down towards the middle of 2017, pulling the market back into balance. Physical Holders Show Increased Hedging The physical industry continues to build its net short positions, although long positions are also increasing after reaching their nadir in the fall of 2015. Changes in both long and short positions tend to increase more or less in tandem. Producers, marketers, processors, and users currently hold over a billion barrels worth of oil in NYMEX WTI futures and options, more than one hundred times what is produced daily in […]