It has been a remarkable few days for crude oil.
But back in May, hedge fund manager Zach Schreiber said he saw this coming.
At the Ira Sohn Investing Conference, Schreiber, the founder of hedge fund PointState Capital who worked under hedge fund legend Stanley Druckenmiller for six years at Duquesne Capital, said that oil was going lower.
According to Josh Brown’s big recap of the Sohn Conference, Schreiber said he wanted to be net short crude oil, saying, “It’s going lower, much lower.”
On Thursday, OPEC, the 12-nation oil exporting cartel, announced that it would not reduce production.
Many expected OPEC to cut production in order to curb the steep drop in oil prices that has taken place in the last few months, and a result of Thursday’s meeting, oil prices got slammed with WTI futures falling below $70 for the first time since June 2010.
“US crude is being drilled for by the same cast of characters who oversupplied the natural gas market. Ladies and gentlemen, the song remains the same,” Schreiber said.
Schreiber said that oil production wouldn’t meaningfully slow until oil fell below about $80 a barrel.
We’re now about $10 lower than that.
Schreiber added that, “Crude strength has led to complacency an complacency is a killer.”
Earlier this year, WTI prices rallied from about $90 to $105 a barrel, and overall, oil has held up well over the last couple years, trading between about $85 and $105 a barrel for most of that time.
And according to Josh’s notes, Schreiber ended his presentation with a great quote from Rudiger Dornbusch, which now basically says everything that needs to be said about the breakdown in oil.
“In economics, crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.”