Oil trader Andy Hall, known for blaming trading losses on fake news, is shutting down his hedge fund after losing 30% on the year. Just like blaming fake news for trading problems is an oddity in the hedge fund industry, the fund’s large loss size relative to a less than 10% move in the price of oil over the same timeframe is another mystery.
After long-bias trader blames fake news, how did the oil trader lose 30% in a market that only down 10%?
Hall, a former star Citigroup trader who earned Congressional scorn after the financial crisis when he pocketed $100 million as an oil trader, closed down his flagship Astenbeck Master Commodities Fund II, Bloomberg first reported, citing sources familiar with the matter.
It was less than a month ago that oil bull Hall was blaming the fake news for a diabolical plot to hold down the price of the black gold. In a June 1 letter to investors reviewed by ValueWalk, Hall said “many market observers and commentators appear to ignore” later revisions and “market moving headlines often appear based on spurious data being given gravity they do not merit” AKA “fake news.”
Because it was a fund as opposed to a direct account structure, the amount of trading that took place for his hedge fund to lose nearly two times as much as the price drop in oil remains unclear. Technical indicators show a choppy market that failed to break out of a trading range most of the year.
"Oil god" was second major energy trader to shut down in 2017
Many fundamental oil traders have been befuddled when considering the supply and demand picture, particularly as oil supply from the US is a moving target as shale production is increasingly a wild card. Technological advances have been bringing down the breakeven cost of production and some shale producers have continued to drill despite production costs coming in higher than prices paid.
Further complicating fundamental price forecasting have been ineffective OPEC production cuts, which many members have simply ignored.
The historic drop from near $109 in June 2014 to touch $29.44 January 2016 also shook confidence in the supply and demand triggers that were driving free market prices.
Hall, for his part, had been fighting to the end, saying that oil was poised for a “violent reversal.” It appears that violent reversal occurred in the fortunes of the Oil trader once known on Wall Street as the “oil god.”