Astenbeck Capital Management founder Andy Hall is so highly regarded in the oil trading business that he earned the nickname "god." But Hall has admitted that the value of his analysis has diminished in an age of automated trading.
The rise of machine-based algorithmic trading is injecting so much volatility into oil markets, it's now difficult to produce returns by doing the type of fundamental analysis for which Hall is known, he told investors in a letter obtained by Bloomberg News. Hall confirmed in the letter he was shuttering his main hedge fund at Astenbeck after it reportedly tanked nearly 30 percent, Bloomberg reported.
"Algorithmic trading systems have increasingly come to dominate," Hall wrote. "Investing in oil under current market conditions using an approach based primarily on fundamentals has therefore become increasingly challenging. It seems quite likely this will continue to be the case for some time to come."
Hall is not alone. Many longtime oil traders have found themselves confounded by sharp price moves that run counter to fundamental signals like the balance of supply and demand, stockpile levels and disruptions in oil-producing regions, The Wall Street Journal recently reported.