Wood Mackenzie said yesterday that a recent surge in hedging against an oil price fall could prolong a glut of oil in the US that has stymied a price recovery.

“Those hoping that recent oil price weakness will prompt US producers to pull back drilling activity and ease the glut of oil supply may need to keep waiting,” said Andy McConn, a Houston-based analyst for the energy consultancy.

The deal reached by Opec last November and followed by 11 non-Opec countries in December to cut a total of about 1.8 million barrels per day from world production has had the effect of boosting prices and encouraging back US shale oil producers, who have now locked in their prices for a substantial amount of that production by selling forward in the futures market.

“Producers rushed to lock in oil prices above US$50 a barrel after Opec’s November announcement about production cuts,” said Mr McConn. The US producers that WoodMac follows “added a higher volume of oil hedges during Q4 than in any of the previous four quarters”, which means they are covered for any price fall that might result from the glut.

WoodMac analysis shows that the companies it follows, led by Apache and Anadarko, have increased their hedges by a third, or an additional 648,000 bpd since the fourth quarter of last year. Most of the hedges have been done at strike prices between $50 and $60 per barrel.

Oil prices have been under pressure because of worries about the slow progress in dealing with the oil glut and fraying of the Opec/non-Opec deal.

Benchmark North Sea Brent futures have fallen by about 9 per cent this month, from the mid-$50s per barrel to $50.54 late yesterday Arabian Gulf time, down 26 cents.

amcauley@thenational.ae