Ebullio Capital Management looks forward to celebrating our 5th Birthday on September 9th, 2012.
We would like to thank our loyal investors who have entrusted us with their money. We will continue to strive everyday to ensure that they stay with us for the next five years and beyond.
Managing Partner Lars H Steffensen of Ebullio was quoted on Reuters in the following article:
Hedge funds bet on oil spike as Israel attack fears grow
By: Barani Krishnan and Jonathan Leff
Hedge funds are quietly laying new bets on a potential spike in oil prices tied to the possibility of an Israeli attack on Iran, skewing the options market to a bullish bias for the first time in six months.
Signs that Israel is losing patience with efforts to curtail Iran's nuclear program, as well as the intensifying conflict in Syria, are giving funds new reason to bet on crude despite a lack of evidence that fundamentals are improving. Activity is muted so far by the summer lull, but could pick up in September.
The renewed premium has been most apparent in futures markets, with benchmark ICE Brent crude gaining 10 per cent over the past two weeks. At the same time, hedge funds boosted their bullish bets in U.S. oil markets a week ago to the highest since early May, regulatory data shows.
"The rally you're seeing now is not because demand is up, but because fear is up," said Charles Gradante, co-founder of New York's Hennessee Group, which invests with hedge funds.
"Some hedge fund managers feel the fundamentals of oil are still negative and the price should go back down, so they're shorting or trying to short. But the majority are net long, waiting for the next shoe to drop in the Middle East."
A flurry of comments by Israeli officials and Israeli media reports over the past week put financial markets on edge by appearing to suggest a strike on Iran could be launched before the U.S. presidential election in November.
While U.S. Defense Secretary Leon Panetta and Israeli President Shimon Peres have sought to downplay the risk of an imminent unilateral attack, some funds are on guard.
In the U.S. crude oil options market, calls are being bid higher than puts for the first time since February, indicating that demand to buy contracts that would gain from rising prices (calls) is exceeding that to take bearish bets (puts).
NOT AS PANICKED
So far the bets appear to be more modest than they were last November, when funds loaded up on cheap options after a United Nations report heightened concerns over Iran's nuclear program, or in February and March, when talk of a possible attack by Israel on Iran drove Brent above $125 a barrel.
Those bets failed to pay off: instead of an attack, tougher U.S. and European Union sanctions slowly cut off half of Iran's oil exports, and options volatility slumped.
"We've definitely seen an uptick in upside call buying," said one senior trader at a large investment bank. "It's not as panicked or vociferous as it was last time because the bluff has been called once -- and because it's August."
But some are trying it again. Open interest in December 2012 $100 call options has risen by nearly 5,000 lots -- or 5 million barrels -- in the past two weeks.
"Given the implementation of the Iran embargo, we have crimped supply enough to add some real upside risk potential that could easily manifest itself in a price spike, especially if a conflict in the Middle East is realized," said Chris Thorpe, executive director of energy derivatives at INTL FC Stone.
"There is some fear baked in, for sure."
To be sure, these are still long-odds events, and broader market gauges aren't flashing red yet. Absolute option volatility levels are low with calls and puts at around 30 per cent, just up from near-record lows under 25 per cent in early May, according to Reuters calculations.
And some say that barring a wider regional war, the main event over the next month or so will be the possibility of further quantitative easing from the U.S. Federal Reserve.
"A strike on Iran might add $5, $10, $15 but once people realize that we're not getting a massive Middle East war, it will go back to where it came from," said Lars Steffensen, managing partner at Ebullio Capital Management, which runs a commodity hedge fund.
"Quantitative easing from the Fed will add $15-$20 to crude, and that's a premium that will stay there."
IRAN AND SYRIA
Gradante, who talks regularly with hedge fund managers about their strategies, said many worry that Iran will get involved in the Syrian conflict in some way to hit back at the United States for the Western embargo on Tehran's oil.
As the Syrian civil war takes on overtly sectarian overtones, it also risks drawing in more regional powers, with Sunni-led Saudi Arabia, Qatar and Turkey supporting the rebels and Shi'ite Iran backing the government.
One way for Iran to retaliate against its Western rivals would be to block Egypt's Suez Canal, an integral waterway for Middle East oil tankers. It had previously threatened to block the Strait of Hormuz, the world's busiest route for oil, but experts say it may not do this as the bulk of Iranian oil also travels through the strait.
"Disrupting supplies through the canal for a few days itself could make oil go to $120, depending how long the debate takes," Gradante said. "If the U.N. gets involved, it'll easily take more than a week. These are the kind of specific scenarios hedge fund managers are speculating over."
The eFED monthly newsletter is now available on the website. This information is restricted, so if you do not have a username and password, please kindly send a request to email@example.com.
We are pleased to announce that Barbara Stcherbatcheff has been promoted to Partner. The Partners of Ebullio appreciate her hard work and dedication since joining us and welcome her warmly to the Partnership.
The Ebullio Far East Commodity Fund is pleased to announce a return of +2.49% in June 2012. This takes the return so far in 2012 to +23.31%.
We are pleased that the Far East Desk Fund continues to build on its successful 2011 where it returned 50.38% and we view the future with confidence.
The latest Far East Desk Fund newsletter is now available on the website.
We are pleased to announce that Barbara Stcherbatcheff has joined the Marketing and Investor Relations Group. Based in Zurich, Barbara will be working closely with the Marketing and Investor Relations Team. We warmly welcome Barbara to the team and look forward to working with her.
We are pleased to announce that Oliver Fry, Dominic Haywood, Norbert Nemes and Gareth Clark have been promoted to Partners. The Partners of Ebullio appreciate their hard work and dedication since joining us and welcome them warmly to the Partnership.
In march 2012, Bill Gross argued that we are at a turning point that will see an increasing change in focus from financial assets to real assets, such as commodities. Gross stated,"you have to move from financial assets into a world of real assets," because emerging markets such as China are not "looking for financial assets, they're looking to lock up commodities going forward."Www.cnbc.com/id/46871380/Invest_in_commodities_Dividend_Payers_Pimco_s_Gross