Andy Hall: Crude Oil Trading 'God' Calls The Bottom (Again)

Mar. 28, 2016 11:09 AM ETUSO, OIL-OLD, UCO, UWTI, SCO, BNO, DWTI, DBO, DTO, USL, DNO, OLO-OLD, SZOXF, OIL28 Comments


  • Oil trading god says oil prices are headed higher.
  • Four reasons in latest March missive.
  • He may finally be right but for the wrong reasons.
  • A former employee's adulation rounds out the picture.

In his March 1, 2016 letter to investors, crude oil trading "god," Andrew J. Hall (AH), called the bottom in oil prices. I (RB) had come to the same conclusion in my article dated March 9th, though I had hedged my bet. The International Energy Agency (IEA) and Goldman both published similar conclusions two days later but cited different reasons.

Mr. Hall gives four reasons in this Letter for supporting his call: production declines, Saudi Arabia, smaller glut than believed, exaggerated macroeconomic headwinds. I comment on each of these below.

Production Declines

AH: "Indirect data suggest that production declines in the U.S. are occurring more rapidly even than these forecasts predict. Reliable direct data on U.S. oil production is not available in a timely fashion. The data published weekly by the EIA (and ballyhooed by the press and analysts who ought to know better) is actually derived from a model. It is superseded by actual monthly data published two months in arrears…The average for the past four weeks is now 863 kbpd below year ago levels. This compares to a year over year decline in the EIA's model of U.S. crude production - which the media perseverates over - of only 83 kbpd."

RB: Looking at the EIA's weekly statistics, production for the four weeks ending February 19, 2016 were 83 kbpd above the year-ago level. But Mr. Hall argues that production is 863 kbpd below last year's levels, which would put production at 8.296 million barrels per day (mmbd).

The "reliable data" he refers to that is published two months in arrears is the Petroleum Supply Monthly. For December 2015, it reported production at 9.262 mmbd. For his estimate to be correct, production would have had to fall by 966 kbpd in less than a 2-month period.

Mr. Hall provides

This article was written by

Robert Boslego profile picture
Energy futures model portfolio and market analysis from an oil expert.
Seeking Alpha Marketplace Premium Service: Boslego Risk Services.

Managing Director, Boslego Risk Services

Harvard College, Economics (Honors), BA

Undergraduate thesis: "OPEC Pricing Strategy."

Harvard Business School Case Study: "Industrialized World and Oil."

Stanford University Graduate School of Business, MBA

I founded Boslego Risk Services and became a recognized expert in the area of energy price risk management (hedging) and trading, providing oil and natural gas hedging strategies to major oil companies such as Exxon, Shell, Mobil, Chevron, Texaco and Phillips; to the national oil companies of Norway, Venezuela, Mexico, Canada, France and Italy; to major users of energy products, such as Delta Airlines, United Airlines, Burlington-Northern Railroad, and Canadian Pacific Railway.

I also provided frequent market assessments and recommended trading positions to major trading firms, such as Enron, Phibro, Sempra and Vitol, and to large hedge funds.

As the recognized expert in energy hedging, I was selected by the former president, John Treat, of the New York Mercantile Exchange (NYMEX) to write the chapter on hedging in his book, Energy Futures (1990, 2000).

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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