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EXCLUSIVE-Oil trader Hall avoids big loss, expects market to struggle
Fri Oct 10, 2014 11:36pm BST
By Barani Krishnan
Oct 10 (Reuters) - Renowned oil trader Andy Hall said his $3 billion commodities hedge fund lost less than 1 percent in September, despite a tumble in global crude markets, which he said will continue to struggle from huge supplies, a letter he wrote to his investors showed.
It was a surprising outlook from a hedge fund manager who was once one of the most outspoken bulls in oil, suggesting he had turned short, or bearish, on the market, at least in the near-term.
Hall's Westport, Connecticut-based Astenbeck Capital Management, which manages approximately $3.2 billion, returned a negative 0.7 percent last month, according to the letter seen by Reuters on Friday.
It was the second month in a row that he had escaped a punishing rout in oil, after posting a gain of nearly 1 percent in August. Year-to-date, Astenbeck is up 12 percent.
Benchmark Brent oil tumbled more than 8 percent in September and almost 3 percent in August. Since June, Brent's front-month contract had dropped around $25, falling below $90 a barrel on Friday to a near four-year low.
U.S. West Texas Intermediate (WTI) crude lost more than 5 percent last month and more than 2 percent the previous month, hitting a July 2012 low of $83.59 a barrel on Friday.
The 63-year-old Hall, who has spent half his life taking steel-nerved bets on oil prices, is known for a $100 million payday while still a trader at Citigroup Inc.
He had almost always been an oil bull, often bristling at the suggestion the world could be awash in cheap oil one day from the fracking technology that draws crude from shale rocks.
"The outlook for nearby oil prices in the short term is not particularly encouraging, notwithstanding continued geo-political tensions," Hall said in Astenbeck's September letter, dated Oct. 1.
"Even if the global economy is assumed to achieve trend growth in 2015, oil demand growth will struggle to keep pace with expected growth in supply."
Hall said even if oil demand grew next year, it was likely to be outstripped by supply growth from countries outside of the Organization of Petroleum Exporting Countries.
"So barring big cuts by OPEC - which seems unlikely - inventories are likely to continue building in 2015. This will continue to pressure nearby prices," he wrote.
No. 1 oil producer Saudi Arabia said on Friday it had boosted its output instead by 100,000 barrels per day in September, raising doubts that it would be prepared to take unilateral action to cut in the near future.
Hall, however, said that lower prices "over time ... should stimulate demand for oil both directly and indirectly by boosting global GDP growth".
In fact, some long-dated oil contracts were already close to levels that made them "attractive" for Astenbenck to add positions it had dropped earlier, he said.
"The upside to owning WTI at below $85 for delivery three or more years in the future is almost certainly a multiple of the downside," he wrote.
(Editing by Bernard Orr)
Fri Oct 10, 2014 11:36pm BST
By Barani Krishnan
Oct 10 (Reuters) - Renowned oil trader Andy Hall said his $3 billion commodities hedge fund lost less than 1 percent in September, despite a tumble in global crude markets, which he said will continue to struggle from huge supplies, a letter he wrote to his investors showed.
It was a surprising outlook from a hedge fund manager who was once one of the most outspoken bulls in oil, suggesting he had turned short, or bearish, on the market, at least in the near-term.
Hall's Westport, Connecticut-based Astenbeck Capital Management, which manages approximately $3.2 billion, returned a negative 0.7 percent last month, according to the letter seen by Reuters on Friday.
It was the second month in a row that he had escaped a punishing rout in oil, after posting a gain of nearly 1 percent in August. Year-to-date, Astenbeck is up 12 percent.
Benchmark Brent oil tumbled more than 8 percent in September and almost 3 percent in August. Since June, Brent's front-month contract had dropped around $25, falling below $90 a barrel on Friday to a near four-year low.
U.S. West Texas Intermediate (WTI) crude lost more than 5 percent last month and more than 2 percent the previous month, hitting a July 2012 low of $83.59 a barrel on Friday.
The 63-year-old Hall, who has spent half his life taking steel-nerved bets on oil prices, is known for a $100 million payday while still a trader at Citigroup Inc.
He had almost always been an oil bull, often bristling at the suggestion the world could be awash in cheap oil one day from the fracking technology that draws crude from shale rocks.
"The outlook for nearby oil prices in the short term is not particularly encouraging, notwithstanding continued geo-political tensions," Hall said in Astenbeck's September letter, dated Oct. 1.
"Even if the global economy is assumed to achieve trend growth in 2015, oil demand growth will struggle to keep pace with expected growth in supply."
Hall said even if oil demand grew next year, it was likely to be outstripped by supply growth from countries outside of the Organization of Petroleum Exporting Countries.
"So barring big cuts by OPEC - which seems unlikely - inventories are likely to continue building in 2015. This will continue to pressure nearby prices," he wrote.
No. 1 oil producer Saudi Arabia said on Friday it had boosted its output instead by 100,000 barrels per day in September, raising doubts that it would be prepared to take unilateral action to cut in the near future.
Hall, however, said that lower prices "over time ... should stimulate demand for oil both directly and indirectly by boosting global GDP growth".
In fact, some long-dated oil contracts were already close to levels that made them "attractive" for Astenbenck to add positions it had dropped earlier, he said.
"The upside to owning WTI at below $85 for delivery three or more years in the future is almost certainly a multiple of the downside," he wrote.
(Editing by Bernard Orr)
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