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Oil producers haven't been this cautious on oil prices since 2007
(Bloomberg/Getty Images)
US oil producers haven't been this cautious on the market in nine years.
Short positions — bets that prices will fall — in US crude-oil futures contracts that are held by producers and merchants in October rose to their highest level since 2007, according to the Commodity Futures Trading Commission.
The contracts totaled 540,000 as of October 11, the Energy Information Administration said.
Oil producers that are worried oil prices will drop can use futures to protect against losses they may suffer.
This works by selling a futures contract, which requires the producer to sell the commodity at the agreed-upon price. If the price of oil is lower than that price when the contract expires, the producer benefits from the difference.
US crude-oil futures fell on Monday, down 1% to $50.34 a barrel, after Iraqi officials showed reluctance to comply with any limits on production that other members of the Organization of Petroleum Exporting Countries agreed to.
That's just one of the risks to oil prices that producers are most likely watching. Additionally, US oil inventories on average are near their highest level for this time of year.
Since May, the count of active US oil rigs has advanced at a pace faster than anything seen since the price crash started in 2014. In part, the rising rig count reflected oil-field-service providers' confidence in the rise in oil prices and their ability to negotiate higher prices from their clients.
The Energy Information Administration said short positions of West Texas Intermediate futures, the US benchmark, had risen at a faster pace than Brent crude futures, the international benchmark, since the summer of 2015. This suggests that producers are able to drill profitably as long as oil stays close to $50 a barrel, the EIA said.
(EIA)
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