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QUOTE O’ THE DAY
"the billionaires got trillions ,the poors got a kick in the face and the bill for the boot”
Page added on June 2, 2013
The oil trader known by rivals as “God” predicts the US shale revolution will only “temporarily” boost production and oil prices will remain high, siding with Saudi Arabia and the Opec cartel in a debate gripping the energy market.
Andy Hall, whose lucrative bets on oil prices earned him a $100m salary at Citigroup in the 2000s, told investors that the rapid decline in output suffered by shale wells is “likely [to] mean that the bounty afforded by shale resources is temporary”.
Surging US oil production is casting a long shadow as Opec ministers gather in Vienna for their twice yearly meeting this week. The International Energy Agency forecasts that North America, long Opec’s largest customer, will become a net exporter of oil by 2030, thanks to the flood of new shale production.
The consensus in the industry is that shale resources could push long-term oil prices down, threatening Opec. Dennis Gartman, a pundit followed by many investors, told CNBC this week: “If there were a way to sell Opec short, I would try to find a way to sell Opec short.”
But Saudi Arabia has taken the view that the shale revolution does not endanger the kingdom or Opec. And Mr Hall, who made a fortune betting that long-term oil prices would rise from $18 to $100 during the 2000s, has become the most senior industry executive to agree.
The trader told investors in his $4.5bn Astenbeck hedge fund, which he runs alongside the Phibro commodity trading house, that while output from shale oil wells is initially prolific, production declines rapidly because each well only taps a single pool of rock-trapped oil, rather than an entire reservoir.
In a letter to investors seen by the Financial Times, Mr Hall said that makes it “impossible to maintain production . . . without constant new wells being drilled [which would] require high oil prices”.
“We read almost daily of new oil discoveries and perhaps this leads to complacency among the lay public,” he added.
Mr Hall also revealed a bullish bet on Brent December 2015 oil futures, currently trading at $94.60. “We continue to hold our longer dated [oil] position with conviction,” he said.
As long as demand continues to grow fast enough to absorb shale output . . .Opec does not need to worry- Opec delegate
“Shale oil and gas boom has been an incredible phenomenon and it would be ridiculous to argue that it is not having a transformational impact on the oil and gas industry,” Mr Hall said. But he immediately warned: “We feel that some of the wilder claims regarding its future prospects need to be tempered.”
Opec ministers are set to devote a large portion of their Vienna meeting on Friday to the impact of the US shale boom. While the rise in shale production is not hurting Saudi Arabia and its fellow Gulf states, other Opec members such as Nigeria and Angola have seen sharp declines in exports to the US.
The cartel is nonetheless set to keep its production target level unchanged at 30m b/d, Opec delegates said on Wednesday. With oil prices hovering above $100 a barrel, even the most hawkish members of the group, which pumps roughly 40 per cent of the world’s oil, have so far refrained from calling for output cuts.
“As long as demand continues to grow fast enough to absorb shale output and prices stay around $100 a barrel, Opec does not need to worry,” one delegate said.