Andrew Hall is known as “The God Of Oil” by some floor traders. When he was to be paid a $100 million bonus, the Great Recession had just begun and anger toward banks prompted officials to reign in corporate bonuses from those which took bailout funds. Since Citigroup owned the Phibro Group, the subsidy that once stood on its own before Citi bought and later sold the organization to Occidental Petroleum, Hall was able to keep his $98 million bonus from 2008 — but not the $100 million bonus from 2009.
Bloomberg News reported on Tuesday Hall would be leaving Phibro as Occidental prepares to close the Phibro fund by year-end. Occidental’s timing is unique considering the events around the global oil market. Some have speculated the sell off is driven primarily through geopolitics as the US attempts to apply greater pressure on Russia and ISIL. Bloomberg also noted that Hall recently said oil would fall to $50/barrel before rebounding in the first half of 2015.
Another possible reason for the increased velocity of the decline in oil — one which has failed to make headlines and the CNBC utterly butchered — could be the liquidation of a position in oil. There is currently no way to prove this scenario; however, the current situation surrounding Phibro may be material to the decline in spot oil prices. It’s apparent oil began its decline as the US applied pressure to the Russian government budget and ISIL’s ability to fund itself through oil sales. During these declines, the already “return-frustrated” Hall who’s had two losing years in the past three, Hall most likely dump positions on Phibro and Astenbeck funds.
Hall headed commodities trading at Phibro and is the head of Astenbeck Capital. Hall was employed at Phibro since 1982 and watched at the firm was sold to Citigroup then Occidental. As a subsidiary of Occidental, Phibro could have the ability to mask its activity in Occidental’s hedging activity. Speaking with traders within the oil complex, I learned that there has been heavy trading activity on the OTC market on the backend of the oil curve. Hall theoretically could mask his trading activity in his Phibro account under Occidental’s general hedging activities thus making it difficult to see exactly what he has been doing. Andy Hall is known to take long bets on the backend of the curve as Bloomberg Markets shows in the image below:
This could be a way for a large holder to avoid having to post exiting positions of long trades on the backend of the oil curve. By dealing on the backend, Phibro’s activity may be overlooked as participants focus more heavily on the front end, or next months contract. As recently as September, Hall went “all in on a bet that the shale-oil boom will play out far sooner than many analysts expect.” With a player this big having a conviction that strong, it would be safe to assume that his liquidation had a material impact on the oil price decline.
This wouldn’t be the first time a single player has shown their impact on the oil market. Recall in 2009 when Stephen Perkins of PVM Oil Futures bought roughly $520 million worth of oil futures in about 150 minutes in a drunken state after a weekend of heavy drinking.. Perkins cornered nearly 3/4’s of the futures market that night and moved oil $1.50/barrel.
No one can know for sure but the seemingly unexpected and at times volatile selling in oil could have very well been Hall.
The next question is which bank has newly created long-term investments with IRR’s generated on expectations of an end product that is now selling for nearly 50 percent less?
With oil futures sub-$60 handle, it would be evident that no one is waiting around to find out if Hall actually did liquidate Phibro. Little doubt remains that we’ve seen the end of the sell-off.
via Zero Hedge http://ift.tt/1uEEpZK CalibratedConfidence