Reuters logo
UPDATE 1-Oil bull Hall acknowledges high stockpiles but says prices low
November 4, 2015 / 10:26 PM / 2 years ago

UPDATE 1-Oil bull Hall acknowledges high stockpiles but says prices low

* 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)

By Barani Krishnan

NEW YORK, Nov 4 (Reuters) - 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.”

He said stockpiles will drop as U.S. refineries ramp up production of gasoline, diesel and other products after the autumn maintenance season, and added that U.S. crude production was also declining.

U.S. oil drillers have cut rigs for nine weeks in a row, with the rig count at 578 from 1,582 a year ago, data showed.

“Today’s oil price, however, carries no risk premium,” Hall wrote. “The oil industry is positioning itself for a world of ‘lower for longer’ oil prices. Barely more than a year ago these same companies were, implicitly or explicitly, basing their investment decisions on $100 oil being the new normal.”

U.S. crude settled on $46.32 a barrel, versus $77.19 from a year ago and the July 2014 high of $107. (Writing by Josephine Mason; Editing by Chizu Nomiyama and David Gregorio)

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below