Why Overly Confident U.S. Drillers Ditched Their Hedges

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.

But with oil and gas prices recently touching multi-year highs, producers that typically lock up prices are hedging very lightly, or not at all, to avoid leaving money on the table if crude continues…