Thursday, November 5, 2015

Oil--Astenbeck Capital's Andrew Hall Says Production Data Doesn’t Suggest Surplus

We have had some success betting against Mr. Hall for the last few years but are aware that one of these days he's going to be right. Not just yet though.
Front month futures $45.76, down 56 cents.

From Reuters:
* Astenbeck up 2.5 pct in Oct, narrows year-to-date loss to 18 pct* Hall admits oil stocks "high", but says market underpriced (New throughout, adds Hall's comments from investor letter and background)
Renowned oil bull Andy Hall has acknowledged the reality of high and growing U.S. crude stockpiles but insists the market is still underpriced, as his hedge fund posted a slight gain in October from higher crude prices.
Hall's Astenbeck Capital Management in Southport, Connecticut, gained 2.5 percent last month, matching October's gains in benchmark Brent crude, performance data sent to Astenbeck investors and seen by Reuters on Wednesday showed.

Astenbeck is now down 18 percent through October, after losses in six out of 10 months, the data showed. Assets under management were at $2.6 billion, versus nearly $3 billion in January.
In a letter accompanying the performance data, Hall alluded to market concerns about the oversupply in oil.

"Oil prices continue to be volatile - buffeted by opposing forces," he wrote. "On the one hand there is a growing realization that current prices are not sustainable. But on the other there is the reality of high and - for now at least - still growing inventories."

U.S. crude inventories rose last week for the sixth consecutive week, the government said on Wednesday, despite imports dropping to 1991 lows.

Hall argued that the stockpile situation would not last.

He called oil bears "Cassandras" whose pessimistic outlook suggests that stocks of distillates including diesel would outgrow storage capacity, causing refineries to reduce processing and prices to collapse.

"We think such a scenario is highly unlikely," Hall wrote. "Whilst localized dislocations are certainly possible, there is no general shortage of storage capacity globally for either crude oil or oil products....MORE
And from BOE report-the source of the headline:
 Andy Hall, one of the best-known oil traders who’s been bullish on prices, said oil inventory data doesn’t indicate a surplus in the crude market and prices are set to rise.

“We think the degree of negativity is unwarranted,” Hall, who runs $2.6 billion hedge fund Astenbeck Capital Management, said on Wednesday at the Invest for Kids conference in Chicago.
Hall cited supply constraints among OPEC members, saying Saudi Arabia is producing close to capacity while Iraq is struggling to maintain output. He said he expects rig counts to continue declining....MORE
Previously on the Andy Hall channel:
Oct. 13
Oil: Astenbeck Capital's Andy Hall Is Long, Wrong and Down 20% Year-to-Date
Aug 10
Despite Losing 17% In July, Astenbeck Capital 's Andy Hall Maintains Higher Oil Prices Are Right Around The Corner
Feb. 9
Astenbeck Capital's Andrew Hall: Oil Is Going To $65 And The Surviving Shale Plays Will Do Just Fine
Feb. 6
UPDATED--Astenbeck Capital's Andrew Hall "See's $40 Oil ‘Absolute Price Floor’"
Oct. 12
Former Oil Guru Andrew Hall Is In Cash 
Sept. 2014 
Oil: Former Phibro Guru Andy Hall Bets Against Shale, Buys Long-dated Futures
$100 Million Oil Trader Andy Hall: Maybe He Wasn't As Good As Advertised
How Some of the Biggest Funds in Oil Trading Got Wrong-footed By the Widening Brent-WTI Spread
Phibro Superstar Andrew Hall’s Commodity Hedge Fund, Austenback Down 10% YTD
The Last Word On Oil Trader Andy Hall and Life On the Right Hand Side of the Distribution
Occidental buys Citi firm Phibro for $250 million (OXY)

Here's the graphic accompanying the Journal's Oct. 13 piece:

Remember, oil futures are a two way market, you are allowed to short the wee beasties.

Regarding the headline, rather than the Journal's two-beat "Long and Wrong" we went with a modified Lady Caroline Lamb who said of Lord Byron: He is "Mad, Bad, and Dangerous to Know".