In the oil and gas industry not everyone hedges all the time, but the vast majority of exploration and production companies have an active hedge book aimed at mitigating risk against volatile commodity markets.

Hedging utilizes a futures contract to lock in a set price (or range of prices) in most cases. A futures contract gives the buyer of the contract the right and obligation to buy the underlying commodity at the price at which he buys the futures contract. Conversely, a futures contract gives the seller of the contract the right and obl...


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