It has been a remarkable few days for crude oil.
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.
As a result, oil prices got slammed on Thursday, with WTI futures falling below $US70 for the first time since June 2010.
And while oil prices have been declining since the summer, with WTI and Crude futures falling more than 30% in just a few months, there was a huge, public call on oil prices go way lower in May that was noted, forgotten, and now looks particularly prophetic six months later.
At the Ira Sohn Investing Conference in May, Zach 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 in May he wanted to be net short crude oil, saying, “It’s going lower, much lower.”
“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 $US80 a barrel.
We’re now about $US10 lower than that.
Scheriber added that, “Crude strength has led to complacency an complacency is a killer.”
Earlier this year, WTI prices rallied from about $US90 to $US105 a barrel, and overall, oil has held up well over the last couple years, trading between about $US85 and $US105 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.”