Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

Renowned trader Hall sees $40 oil ‘absolute price floor’

Post Thumbnail

Oil prices have almost bottomed out and “some recovery” is likely by the second half of the year as demand picks up, commodity hedge fund manager Andrew J. Hall told investors.

Crude could trade in the $40-a-barrel range in 2015, close to “an absolute price floor,” the head of Astenbeck Capital Management wrote in a letter.

A significant amount of US and Canadian production can’t cover the cash costs of operating at that price, he said.

“Oil prices will stay under pressure in 2015,” he wrote. “However, current prices are not sustainable in the longer term.

“The interplay between extreme weakness in the short term and the potential for supply shortfalls in the medium term should create attractive trading opportunities over the course of the coming 12 months.”

Hall gained notoriety in 2009 after receiving a pay package of about $100 million while at Citigroup Inc., a bank that received government assistance during the financial crisis.

For more than two decades he led Phibro LLC, which Occidental Petroleum Corp. (OXY) bought from Citigroup. Founded in 2010, Astenbeck manages a total of $3 billion.

Phibro is in the process of being sold by Occidental and Astenbeck is now operating independently, according to two people familiar who asked not to be identified because the matter is private.

Spokeswomen for Occidental and Astenbeck declined to comment.

West Texas Intermediate oil, the US benchmark, fell below $50 a barrel this week for the first time in more than five years.

WTI rose 1 percent to $49.11 at 1:21 p.m. today in Sydney. Prices fell 46% last year, as flagging demand forecasts met expanded output from North American shale formations.

A futures contract for April delivery is selling for $49.78. Delivery in December is $55.12 a barrel, according to data compiled.

Saudi Arabia and its allies are seeking to drive high-cost producers from the market, Hall said.

While many have assumed this is US shale drillers, the majority can operate at lower prices, he wrote.

The most vulnerable operate in Canada’s oil sands and deep-water production, said Hall.

Cuts in spending this year will set the stage for an eventual supply shortfall, said Hall, who has long held that oil will become more expensive.

Once prices begin a sustained increase, companies won’t be able to count on as much new crude from projects.

The low prices also increase the risk of geopolitical instability, another factor that could boost oil if a major producer is unable to make exports, Hall said.

Recommended for you

More from Energy Voice

Latest Posts