Oil16 Sep 2019 22:54
Myles McCormick 14 HOURS AGO
‘God’ speaks
Andy Hall – arguably the most successful oil trader of his generation – has given his insights on the weekend’s developments exclusively to the FT.
Over a near 45-year oil trading career, Mr Hall gained a reputation for landing on the right side of some of the biggest bets in the market’s history.
He earned the nickname “God” in 1990 when he made an incredibly risky bet on the price of oil ahead of Saddam Hussein’s invasion of Kuwait – the last time crude spiked as much as it did on today’s open.
Mr Hall shut down Astenbeck, the world’s largest energy hedge fund, in 2017 but remains a keen follower of the market.
Here is what he had to say this morning to the FT’s energy editor David Sheppard:
Obviously this is a huge development. The loss of production is comparable with that during Saddam’s invasion of Kuwait. An SPR release in the US isn’t going to help offset it much as US crude export capacity is maxed out and opportunities for import substitution are very limited.
Ironically, the Saudis have run down their own excess crude/strategic inventories in recent years and these now appear to be at multi-year lows if published data are to be believed.
OPEC “spare capacity” consists primarily of Iranian production constrained by US sanctions. It seems unlikely they will be lifted in the current circumstances! A meaningful production response elsewhere would take years even for US shale which has anyway seen it’s production growth start to roll over and would quickly encounter infrastructure and other constraints.
This attack underscores the vulnerability of oil production facilities in the Middle East in particular and the world in general. All the tens of billions of dollars the Saudis have spent on weapons could not protect them from a dozen or so low tech drones. Asymmetrical warfare indeed!
It would seem the oil market needs to not only price in the current supply loss but also a higher risk premium for the future. On the other hand, the apparent fragility of the global economy will now be further tested by an oil price spike.
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