Jonathan Goldberg is the Founder and Chief Investment Officer of BBL Commodities LP, an investment manager which employs a fundamental, discretionary relative value strategy focused on the petroleum complex and natural gas. Jon has spent his entire career analyzing and trading in the oil and gas commodities markets, beginning at J. Aron, the commodities division of Goldman Sachs from 2003 to 2010. His first role was in working with Goldman’s refining and end-user clients on structured hedging transactions before taking over a proprietary trading role.
Mr. Goldberg then worked as a partner in Glencore’s oil department from 2010 through 2013, where he was responsible for helping to build the firm’s US oil derivatives business. Mr. Goldberg managed a proprietary book and leveraged his financial experience as well as his understanding of the physical oil markets, and subsequently launched BBL in August of 2013, bringing several members of his Glencore team along with him.
In this Opalesque.TV interview, Mr. Goldberg discusses how his relative value commodity approach differs from many other hedge fund peers in the sector, and how the investment process more appropriately reflects the actions taken within an oil trading house.
BBL Commodities: 2017 Opportunities In Crude Oil, Refined Products And Natural Gas
The strategy is versatile in its application and expression and is designed to operate in different and changing market conditions. Trade expressions are predominantly designed through futures based spreads, with a focus on the middle part of the futures curve. Whilst the strategy may take directional exposure, it typically has no directional bias and provides diversity by being comprised of different trades through the petroleum complex, which at times may be independently bullish or bearish in nature.
The foundation of the investment process is the fundamental analysis of micro supply and demand balances in global oil and micro oil market, seeking to identify and capitalize on the potentially substantial mispricing that exists in the market, due to seasonal trends, poor understanding of the dynamics of the forward curve and incomplete supply and demand analysis by market participants.
Jon describes what makes the market environment in 2017 flush with opportunity sets for relative value oil trading, particularly due to OPEC’s crude oil production cuts and US supply growth. Relative value oil traders can capitalize on such movements, trading the front of the curve versus the back of the curve.
Learn more about:
- Why OPEC’s production cuts combined with US production trough drives relative value trade opportunities
- The impact of upcoming spec changes coming to the US market, and why regulatory changes will increase global distillate demand
- The importance of a diversified set of positions into different themes
- Natural gas market sell-offs in 2017 due to historically warm weather
- Natural gas production is actually declining on a year-on-year basis in both 2016 and 2017
- Why gas markets may see very large inventory declines going through the summer and into the winter of 2018, driving higher prices for the forward curve
- How a strategy based on relative value is able to operate in different and changing market conditions
- Importance of diversity in positions