Oil Hedging Leaves Traders Dangerously Exposed

Hedging is a popular trading strategy frequently used by oil and gas producers, airlines, and other heavy consumers of energy commodities to protect themselves against market fluctuations. During times of falling crude prices, oil producers normally use a short hedge to lock in oil prices if they believe prices are likely to go even lower in the future.  However, hedging is far from being a silver bullet that is guaranteed to protect oil producers from volatile markets, something U.S. shale producers understand only too well. Indeed,…