Blog

Crude Oil Price Alert

March 23, 2017
R^2 producer clients received recommendations to hedge oil at $54 - $57/Bbl during the four weeks preceding the timely ALERT below.
 
Sent: Wednesday, March 08, 2017 8:25 AM
Subject: Crude Oil Price Alert
Importance: High
Dear Client,

 
If the close on Friday is below $52.54, our trend indicator will turn to down.
Weakness in oil this  morning has crude prices ...

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Platts 4th Annual North American Crude Oil Summit

February 20, 2015

Come join R^2 at the North American Crude Oil Summit.

 

Location: JW Marriott Houston Downtown Hotel

Date: February 26, 2015

http://events.platts.com/north-american-crude-oil-summit?mvr=eventlisting

 

Wayne Penello will be moderating the panel on World Oil Markets at 9:15 am and we will also have representatives at the booth to answer any questions you may have.



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Where is the Floor in Crude Oil?

January 22, 2015
In recent weeks R^2 has been asked “How low can oil prices go?” This is the wrong question. John Maynard Keynes said “Markets can remain irrational longer than you and I can remain solvent.” His point was that it is foolish to believe that anyone can consistently identify market tops or bottoms. They are impossible to pick. The more important question focuses on the sharply contrasting risks one ...

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Q&A with R^2 - Successful Hedge Programs

January 13, 2015
Q: Why should an oil and gas firm hedge its production?
A: Most firms that hedge do so to ensure their future cash flows. With a well-designed hedge program, a company can be confident that it will achieve budgetary success regardless of swings in commodity prices.
Q: What is the hallmark of a successful hedge program?
A: Successful hedge programs are powered by robust analytics. All ...

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NAPE SUMMER 2014

August 22, 2014
R^2 hosted a breakfast during Summer Nape in Houston on August 21, 2014. Thank you all for those who attended. It was a great success. Two of our analysts presented on current dynamics in the crude oil and natural gas markets.
 
Outlook for Natural Gas - The New Normal by George Romagus
Growing natural gas production in the US, coupled with inadequate take-away capacity has led to depressed pricing in Marcellus ...

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Macro Hedge Decisions for Producers

July 16, 2014
Question from client:
We want to remove some of the risk from our portfolio. Is this a good time to add hedges for Crude Oil, Natural Gas, and Natural Gas Liquids?
 
R^2 Response:
1) Crude Oil
The Iraqi geopolitical situation is a wild card. But risk premium due to potential loss of production is getting built into the price.
Larger scale risks are being ignored. The US Dollar is poised to go much ...

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LDC Gas Forum - Northeast

May 29, 2014
Come join R^2 at the Northeast LDC Gas Forum on June 16-18, 2014 in Boston, MA.
 
Monday Jun 16, 2014 1:00 pm - 5:00 pm
Seminar: Hedging for Budgetary Success
Register Now
 
SEMINAR DESCRIPTION:
This class provides tools that can be used to solve the most common dilemma facing managers of hedge programs; hedge portfolios are designed to insulate a firm’s cash flows from commodity ...

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In Flux: Crude Differentials - Oil & Gas Investor

May 5, 2014
"While the U.S. tight oil revolution has introduced a new set of locational pricing dynamics for crude, producers should be more concerned about the potential for absolute price changes.
 
Prior to 2011, West Texas Intermediate, Brent and Louisiana Light Sweet crudes traded closely together. Producers would generally get the same price whether they delivered crude to Cushing, the Gulf or the East and West coasts.
 
As ...

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LDC Gas Forum - Southeast

March 28, 2014
Come join R^2 at the Southeast LDC Gas Forum on April 14-15, 2014 in Atlanta, GA.
 
Monday Apr 14, 2014 1:00 pm - 5:00 pm
Seminar: Hedging for Budgetary Success
Register Now
 
Tuesday Apr 15, 2014 10:15 am - 11:45 am
Speaker Panel - Effects of the Polar Vortex
Presentation - Polar Vortex Heats Up Basis Risk
 
SEMINAR DESCRIPTION:
This class provides tools ...

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Crude Oil Alert: This Time May be Different

March 26, 2014
Is your P98 (low case revenue) adequate for 2015? At R^2, we quantify risk as the difference between P50 (base case revenue) and P98 (low case revenue). Our patented process updates these risk estimates each month (“RRHR”) by refreshing objective observations of price and volatility used as inputs for modeling price risk. Our model, like all models, is only as good as the data and assumptions it uses.
Here ...

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Nymex WTI Speculation Hits An All-Time Record

February 14, 2014
The most recent update by the CFTC, released Friday, February 14, 2014 showed net speculative length by non-commercials was at a new record of +423,000 contracts. The accumulation of long positions has been supportive of oil prices, but in excess it is destabilizing. Speculators can only cash out by liquidating, which will put downward pressure on prices.
 
Below is a chart of net speculative length (left axis, ...

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Update - Should Producers Hedge Natural Gas Now?

January 22, 2014
YES! Earlier this month gas dipped below $4.00 momentarily because Commodity Index Funds were readjusting their portfolios. With that selling out of the way, traders refocused on the weather and were able to rally prices above $4.50. Bal 14 swaps at $4.36 are attractive, given that 2013 averaged $3.65 and the previous 5-years averaged $3.77. Cal 15 is trading at $4.17. We recommend hedging Cal 15 with collars, for example ...

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Should Producers Hedge Natural Gas Now?

November 7, 2013
R^2,
 
Given the recent downward pressure on gas in 14, what could we do to protect cash flow but not limit future upside?
 
Sincerely,
Upstream Producer
 
Comments:
 
This is not a place we want to hedge if you don’t have to. The market has been in a tailspin for 2 weeks. The Cal 14 swap is at new lows and near its minus 2 STDEV bar. We would expect that any threat of cold weather should ...

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Crude Oil Hedging for Producer

September 10, 2013
R^2,
 
Please provide your insight along with some historical charts for Cal ’14 oil. We are considering a 200 bopd LLS swap. Please provide a midmarket indication as well.
 
Sincerely,
Upstream Producer
 
Comments/Color:
R^2 has been advocating crude oil hedging for producer essentially all summer. The reasons behind this are:
Speculative length of long positions is at an ~all-time record
Pricing ...

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Crude and Natural Gas Price Fluctuations in Response to Geopolitics and Supply

September 9, 2013
Crude is down $0.60 with sellers in control.
Natural gas is up $0.06 with buyers in control.
 
 
Crude oil was supported by concerns over Syria and the potential for international conflict.  President Obama is expected to speak to the public on Tuesday and Congress may vote on the resolution authorizing the use of force as early as Wednesday.
 
 
Natural gas put in a poor showing this week.  ...

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Hedge Natural Gasoline for balance of 2013

September 5, 2013
R^2,
 
Please provide your fundamental/technical thoughts on pentanes for the rest of the year?
 
Sincerely,
Upstream Producer
 
 
 
Comments/Color:
Quick Summary: Hedge Natural Gasoline for balance of 2013 to take advantage of the geopolitical bump in price.
 
Discussion: Thanks for your interest in an update on hedging NGL’s. NATURAL GASOLINE valuation vs. WTI has improved ...

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