Re: "Given your usual level of erudition, I can not understand...

Re: "Given your usual level of erudition, I can not understand your confusion"

Yes Gilbert and @Mr.Hustler

I agree an off market agreement whereby you simply elect to lock in a price with a buyer and and therefore forgo oil price gains above that price was what I took hedging to mean in my original post. Such a contract would of course have a either an asset or liability value relative to the oil price at any particular moment in time and still be speculative to that extent, but that extent only.

It was only when the comments by HKP and CV encouraged me to look into it further that I read that in practice most oil price hedging was obtained through often complex on market futures contract arrangements. That may not in fact be correct, and coming to an off market agreement with a third party may well be more the norm as you say and would avoid all the down payments and risk of margin calls that could make the position more speculative.

pj