During the 1990’s one of our active integrated oil customers decided to stop hedging/trading and concentrate on becoming the lowest cost oil producer… Here is a modern day, slightly different, version of the story:
Exxon doesn’t hedge price risk… Here is a recent story from SeekingAlpha:
”Exxon Mobil (XOM -0.2%) aims to cut the cost of pumping oil in the Permian Basin to just $15/bbl, thanks to its massive scale of planned drilling activity that it says will help generate $5B of cash flow from the region by 2023.
The scale means XOM can spread its costs over such a big operation that the Permian will become competitive with almost any place in the world, says Staale Gjervik, president of the company’s XTO Energy shale division.
And here is the Financial Times on Pemex, which makes a big splash in the markets when they buy puts for price protection: