Meet the God of Crude Oil Trading, Andrew John Hall. He correctly anticipated both the run up and the eventual collapse of the crude oil prices in 2008. Hall was so good that he bagged a $98 million payday in 2008, when he ran Citigroup Inc.’s Phibro LLC trading unit, and was up for about $100 million more in 2009. Hall is all set for placing another great bet of his trading career. Will he be proved right this time and win the bet. Only time can tell. Shale oil boom is anticipated to reduce the global oil prices. This is what the market is anticipating. But Andrew John Hall is a contrarian. He thinks that shale oil boom will be a dud and oil prices will continue to rise.
Hall is going all in on a bet that the shale-oil boom will play out far sooner than many analysts expect, resulting in a steady increase in prices to as much as $150 a barrel in five years or less.
Investing ever-larger sums of his own money, he’s buying contracts for so-called long-dated oil, to be delivered as far out as 2019, according to interviews with two dozen current and former employees and advisers who are familiar with Hall’s trading but aren’t authorized to speak on the record. To attract buyers, the sellers of these long-dated contracts — typically shale companies that have financed the boom with mounds of debt — need to offer them at a discount to existing prices.
Hall’s strategy — which in a May letter he described as more akin to “loan-sharking” than market speculation — has already shown some signs of success.
If you keep the track record of the traders who made it big, they were always contrarian in their approach. This includes George Soros and Warren Buffet. Warren Buffet stayed out of the tech bubble when most investors were jumping into it. But when you play big, you are more of a poker player than a trader. Risk and money management is always the hall mark of good trading.