Oil rout roils E&P and airline hedging strategies

Corporate risk management programmes have had a mixed track record amid the recent plunge in crude prices. Oil producers with a conservative approach to hedging are emerging as some of the winners, while some airlines are feeling regretful about their hedging activities

Many hedging programmes did not anticipate huge oil price plunge

It may be a distant memory now, but for nearly four years, peace and quiet reigned in the oil market. From 2011 up until September of last year, benchmark North Sea Brent crude oil hovered in a price range of roughly $100 per barrel (/bbl) to $120/bbl. Bank commodity desks complained that hedging activity was sluggish, as exploration and production (E&P) firms and other clients were lulled into complacency by a range-bound market. Hedge funds suffered from a lack of trading opportunities, and