New York (HedgeCo.Net) In a letter to investors in Astenbeck Capital Management, fund manager Andrew Hall laid out his arguments for being very bullish on oil. Hall cited growing demand and a decline in supplies as the main drivers behind his bullish posture.
According to Hall, oil production in the United States peaked at almost 10 million barrels per day in February, but production has been falling since then. He went on to state that U.S. oil output is starting to shrink to a drastic reduction in drilling rigs. The production estimates are based on weekly data from the U.S. Energy Information Administration. While the number of rigs drilling has been falling at a record pace, the EIA has also predicted that oil output from major shale players would begin to decline in April.
Oil has jumped over 27% over the last 30 trading days and Hall thinks that trend can continue because it will be harder for producers to ramp up production that it was to cut it.
Oil and energy ETFs have taken advantage of the spike in oil prices and have moved higher as well. The Energy Select Sector SPDR (NYSE: XLE) is up 7.24% in the last 30 trading days. The HedgeCoVest Energy and Utilities Long-only model is up 9.05% during this same time period.
