Renowned oil trader Andy Hall suffered his second-biggest monthly loss ever in July in a "brutal month" that left his hedge fund about $500 million poorer, telling investors he failed to anticipate a sudden market shift that roiled crude.
Hall's Astenbeck Capital Management in Southport, Connecticut, was the latest commodity fund to be hit by plummeting crude oil prices, following two funds closing last week.
Astenbeck posted a 17 percent loss for last month and a 15 percent decline on the year after the July selloff triggered by record pumping of oil by Middle East producers, higher U.S. crude stockpiles and China's stock market collapse.
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Oil prices are currently around $40 a barrel, down from about $100 a year ago. In July alone, U.S. crude fell 21 percent, its most since the 2008 financial crisis, while Brent , the global benchmark, dropped 18 percent.
"Last month was brutal for most commodities and anyone investing in them," Hall, an avowed oil bull, said in a letter to Astenbeck's investors, seen by Reuters on Thursday.
It was the worst month for Astenbeck since a 19 percent slide in September 2011 and eclipsed the 14 percent drop in May 2012 which Hall described as his "mensis horribilis," Latin for horrible month.
Astenbeck's total assets under management, which comprise two commodity funds, including an oil-focused one, fell to $2.8 billion from $3.3 billion in June, according to performance data that accompanied the letter.
Hall, a 64-year old former Citigroup star trader, has spent half of his life taking steel-nerved bets on oil prices.
Dubbed "God Trader," few could compare with Hall in his heyday as he went from one profitable year to another. He was among the first to see in 2003 and 2004 that oil prices were poised to break out of a more than decade-long trading range.
But the post-financial crisis years proved he was only human. By the end of 2011, he suffered his first annual loss of nearly 4 percent at Astenbeck after a euro zone banking debacle and fickle investor sentiment.
He has also underestimated the potential of the fracking technology that draws crude from shale rocks in the United States, and which has now flooded world supply.
The slim, towering Oxford-educated Briton, known for his departing $100 million bonus from Citigroup, pricey art collection and castle in Germany, blamed the July losses more on market perception than failed strategy.
"Even more importantly, the perception of a large and persistent crude oil glut is now endemic and has triggered a massive shift in sentiment - one that we frankly did not anticipate," he wrote in the letter.
"One reason for that is that we see fundamentals continuing to improve and believe there is something of a disconnect between perception and reality."
Astenbeck also trades platinum and palladium. But Hall devoted his entire seven-page letter for July, barring one paragraph on precious metals, to his defense that oil prices should rise despite a supply surplus forecast through 2016 by the U.S. Energy Information Administration.
"However, the IEA forecast is the one used by most oil analysts on Wall Street as the basis for their own forecasts. For that reason the consensus view is now extremely bearish."
Two commodity-focused fund managers, Armajaro and Cargill's Black River, shuttered their funds last month after hefty losses.
The founders of another commodity fund, Vermillion Asset Management, left the firm after an exodus of investor cash.
This week, the 19-commodity Thomson Reuters/Core Commodity CRB Index, a key sector benchmark, fell to 12-year lows after losing 15 percent this year.