US Oil Producers Rushed To Hedge… Just In Time

Authored by Tsvetana Paraskova via OilPrice.com,

• U.S. oil producers rapidly increased hedging activities to lock in higher prices following a surge triggered by Israel’s strike on Iranian facilities.

• Hedge trades hit record highs on platforms like Aegis Hedging as producers anticipated short-term price spikes, aiming to protect profits amid geopolitical risks.

• With a ceasefire now easing geopolitical tensions, the window for securing higher oil prices has quickly closed, returning WTI to pre-conflict levels around $65 per barrel.

U.S. oil producers flocked to hedge higher prices for their output for the rest of the year and early into 2026 as international crude oil prices surged earlier this month.

Early on June 13 local time, Israel attacked Iranian nuclear facilities and military leadership in coordinated strikes that sent oil prices surging amid concerns that an escalating conflict could disrupt oil flows from the Middle East.

On the night of June 12 and the following morning, Texas-based Aegis Hedging Solutions – a company with a platform for oil producers’ hedging – registered its highest-ever number of hedge trades, Aegis Hedging’s president Matt Marshall told Bloomberg.

U.S. shale producers, who were under-hedged going into this spring, saw a major opportunity to lock in higher prices for the next few months as WTI crude prices surged out of the high $50s – low $60s per barrel price range and hit the $75 mark last week. 

Oil prices had lingered into the low $60s for the three months between early April and early June, as the U.S. tariff blitz and the OPEC+ production hikes weighed on market sentiment with fears of oversupply.

As of March, a survey by Standard Chartered of 40 independent U.S. oil and gas companies revealed they had little protection, with a 2025 oil hedge ratio of just 21% for their combined 5.03 million barrels per day (bpd) of production and a 2026 hedge ratio of just 4%.

To compare, the U.S. shale industry entered 2020 with an oil hedge ratio of 51.7%, which provided significant support when oil prices collapsed during the pandemic. 

As of the end of 2024, independent North American oil and gas producers had more than 80% of their first-half 2025 oil production unhedged, leaving them exposed as OPEC+ supply hikes and concerns about a global recession weighed on the market, data from Evaluate Energy showed in April. 

Hedging activity, however, spiked on June 12-13 to a record high on the Aegis Hedging platform as producers rushed to lock in higher prices in the short term amid the geopolitics-driven jump in WTI prices.

Such war premium-related spikes in oil prices tend to lift the front of the futures curve more than contracts further out in time, unlike in price jumps related to fundamentals.

In the case with the Middle East conflict, the hedging strategy was geared more toward the short term, Aegis Hedging says. 

“In this case it was probably a six-month effect,” Aegis Hedging’s Marshall told Reuters.

“Producers recognized that this could be a fleeting issue and so they saw a price that was above their budget for the first time in a few months, and instead of doing a structure that would give them a floor which is below market, they opted to be aggressive and lock in,” Marshall added.   

U.S. oil and gas executives polled in the Dallas Fed Energy Survey in Q1 indicated that their companies need an average $65 per barrel to profitably drill a new well. 

Oil companies that hedged production probably did so just in time. The tentative ceasefire between Iran and Israel, which was announced by U.S. President Donald Trump as “complete and total,” has deflated the geopolitical risk premium and brought WTI oil back to $65 per barrel, roughly the level where it traded at before the Israeli strike on Iran.