Canadian Oil Producers Abandon Price Protection Strategies Amidst Market Volatility

Canadian oil producers are rethinking their price protection strategies after taking significant losses from hedging positions this year.

Hedging is meant to serve as insurance against price fluctuations, but when prices surge, companies miss out on the potential profits. This year's oil price spike due to the U.S.-Iran conflict has been particularly costly for those who locked in lower prices.

Baytex, a Canadian energy company, reported losses of approximately C$113 million from its hedging positions so far this year, compared to just C$12 million during the same period last year. Saturn Oil & Gas Inc. saw about C$150 million in derivative-related losses in the first six months.

In response, some companies are abandoning their hedges altogether. Baytex no longer holds West Texas Intermediate (WTI) hedges and does not expect to add any. Tamarack Valley Energy Ltd. plans to lower its hedged output to around 20% from about 50%, while International Petroleum Corp. has carried no WTI or Brent price protection since July.

However, not all companies are walking away from hedging entirely. Obsidian Energy Ltd. is actually increasing its hedging for the third quarter of 2026, citing war-driven price gains and its need to pay down debt.