Andy Hall says goodbye to oil market citing worsening outlook

The outlook for the oil market next year has "deteriorated in recent weeks," renowned oil trader Andy Hall told investors in a letter dated Aug 1. that announced the closure of his flagship hedge fund Astenbeck.

 After losing money earlier this year on bets that oil prices would rise, Hall warned crude supply in 2018 could be more plentiful than he expected just a few weeks ago, according to the letter that was reviewed by Bloomberg News. In the medium term the market "still looks challenging", he wrote.

"With the WTI forward curve back above $50, shale operators will be able to profitably hedge incremental production for 2018," said Hall. "The fact that OPEC has had to talk about further extending its production cuts is ultimately a sign of weakness, not of strength."

As one of the most renowned oil traders of the last three decades his views are still closely watched, even as he winds down his main fund.

The firm’s flagship fund lost almost 30 percent in the first half of the year, a person with knowledge of the matter said earlier this month, asking not to be identified because the details are private. In the letter, Hall complained that it was nearly impossible to trade oil based on fundamental trends in supply and demand, leaving the market at the mercy of computer- based trading systems.

 "Oil price bulls argue that the shale oil business model is a flawed one and is unsustainable, at least at current prices", he said. "Bears, on the other hand, say technology is allowing these companies to continuously drive costs lower as well as add to recoverable reserves."

Source: Bloomberg Pro Terminal

Jr Trader Ivan Ivanov

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