What has changed in the oil market? Even the God of oil trading has fallen.

[helpme_please]

If traders call him God, then he must be the best. If the best has fallen, this tells us something very significant has changed in the market. What has changed in the oil market to cause God to fail? Any ideas from elite oil traders on this forum?

https://www.bloomberg.com/news/arti...ll-is-said-to-close-main-astenbeck-hedge-fund

If an oil trader so good that he was known as “god” can’t win in today’s markets, it’s hard to imagine who can.

Andy Hall is closing down his main hedge fund after big losses in the first half of the year, according to people with knowledge of the matter. His flagship Astenbeck Master Commodities Fund II lost almost 30 percent through June, a separate person with knowledge of the matter said, asking not to be identified because the details are private.

 

[helpme_please]

One answer is provided in the article.

The fund closure shows “how the world of forecasting the oil market changed after the shale revolution,” said Anas Alhajji, an independent analyst and former chief economist at private-equity group NGP Energy Capital Management LLC.

But why should shale oil make getting the supply of oil right so difficult? It is just another way of oil exploration and production.

 

[NominalSpeculator]

One answer is provided in the article.


But why should shale oil make getting the supply of oil right so difficult? It is just another way of oil exploration and production.

i don't think its that complicated but lack of transparency makes it hard to study completely why:
1. Until now I have yet to see a clear demonstration of what the breakeven price is for each bassin
2. Because of they way these projects are financed: they sell LONG Dated futures en masse to secure funding from banks and high yield energy investors
3. Diversity within Shale, the possibilities and complexities are really though to grasp for people who aren't spending a few weeks on-site and have a certain amount of expertise
4. Very little foreigners understand the intricacies of middle east politics
5. uncertain situation surrounding nigeria , lybia and other cess pools of shit (and some barrels)
6. Amount of variables going into that price: add iran, add china SPR
and lastly and perhaps most importantly, oil futures aren't that big hence the huuuuge moves and it's a highly speculative market too vs say, treasury bonds.
if you can make sense of all of this. you can trade oil.

 

[birzos]

If traders call him God, then he must be the best. If the best has fallen, this tells us something very significant has changed in the market. What has changed in the oil market to cause God to fail? Any ideas from elite oil traders on this forum?

https://www.bloomberg.com/news/arti...ll-is-said-to-close-main-astenbeck-hedge-fund

That's very simple, oil is in a $52 to $18 range, fight it and you will lose. Given it's the most manipulated market on the planet, plus everyone is fighting for income and trying to put each other out of business you get a dynamic which only a few understand, and today he just doesn't cut it in that environment.

It comes back to your comment on shale, the old world producers want to put them out of business, they will succeed but shale will put up a fight. You just have to be able to identify the capitulation points, very few fund managers have access to that knowledge and fintech combination which is efficient enough to make accurate decisions.

Even the institutions are losing that battle, I've spoken to their fintech providers, have been requested to consult for them, and it always comes back to the simple fact they are behind the curve. Today the old world produces can obscure the truth better than the fund managers can unwind it to gauge probability, so they've just given up.

For me this is the dynamic that helps me get up at 5am to trade the markets, unwinding perfectly obscured synthetic situations made to look natural by the best of the best, Saudis, Russia, US where the titans in the hedge fund industry are waving the white flag, wimps.

 

[Maverick74]

i don't think its that complicated but lack of transparency makes it hard to study completely why:
1. Until now I have yet to see a clear demonstration of what the breakeven price is for each bassin
2. Because of they way these projects are financed: they sell LONG Dated futures en masse to secure funding from banks and high yield energy investors
3. Diversity within Shale, the possibilities and complexities are really though to grasp for people who aren't spending a few weeks on-site and have a certain amount of expertise
4. Very little foreigners understand the intricacies of middle east politics
5. uncertain situation surrounding nigeria , lybia and other cess pools of shit (and some barrels)
6. Amount of variables going into that price: add iran, add china SPR
and lastly and perhaps most importantly, oil futures aren't that big hence the huuuuge moves and it's a highly speculative market too vs say, treasury bonds.
if you can make sense of all of this. you can trade oil.

This is an intelligent post. Damn that's rare on this site. Kudos.

 

[bh_prop]

That's very simple, oil is in a $52 to $18 range, fight it and you will lose.

If you say so. Oil futures traded >57 first week of 2017. Last time it was <20 was when? 2003?

 

[Martinghoul]

If traders call him God, then he must be the best. If the best has fallen, this tells us something very significant has changed in the market. What has changed in the oil market to cause God to fail? Any ideas from elite oil traders on this forum?

https://www.bloomberg.com/news/arti...ll-is-said-to-close-main-astenbeck-hedge-fund

In this case, it appears quite simple...

The price of oil has changed in the market. Andy Hall, seemingly, has not been able to accept it.

 

[Maverick74]

In this case, it appears quite simple...

The price of oil has changed in the market. Andy Hall, seemingly, has not been able to accept it.

Not quite. Andy Hall is NOT long oil. He is long the curve. That means in general he is short the front end of the curve and long the back end. You may or may not know this Marty, but the forward curve got decimated the last 12 to 18 months. Why didn't he get just get out then you might ask? Well, good question, because there is little to no liquidity in 2022 to 2024 where he is long. Was he wrong on the curve? Yeah, big time. But it's a lot more complicated then your simplistic response.

 

[themickey]

https://www.reuters.com/article/us-china-oil-refining-idUSKBN1AK0MC

 

[Martinghoul]

Not quite. Andy Hall is NOT long oil. He is long the curve. That means in general he is short the front end of the curve and long the back end. You may or may not know this Marty, but the forward curve got decimated the last 12 to 18 months. Why didn't he get just get out then you might ask? Well, good question, because there is little to no liquidity in 2022 to 2024 where he is long. Was he wrong on the curve? Yeah, big time. But it's a lot more complicated then your simplistic response.

If I look at the WTI curve, I don't see the phenomenon you describe here.

Specifically, in the past 12 months, I don't see a particularly large move in the curve. 2017 YTD, when Andy Hall's fund's return has been reported as -30%, I can see that the curve has gone from very slight backwardation to being reasonably in contango (as per your suggestion, I've looked at the Z17 - Z22 time spread). If he were short the fronts and long the back contracts, he should have benefited. A similar story in Brent.

To be more specific, YTD in 2017 Z22 WTI contract is down $3.20 (from $56.77 to $53.57). During the same period, Z17 WTI is down $7.04 (from $57.06 to $50.02).

If your theory were correct, it may have explained the loss his fund experienced in 2016, during which the curve went from contango to slight backwardation. However, if that were still the trade, all that money should have come back by mid 2017. Obviously, it didn't.