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Citadel’s head of commodities has said Donald Trump’s social media posts during the Iran war have transformed how oil markets behave, leaving traders struggling to adjust to the volatility sparked by the US president’s frequent messages.
Sebastian Barrack, who has helped build Ken Griffin’s hedge fund into one of the world’s most influential energy traders, told the FT Commodities Global Summit that he had a screen solely to monitor the president’s social media posts.
The early days of the Middle East conflict were characterised by big price swings as the market struggled to process the scale of the dislocation, he said, with moves often prompted by the president’s online missives.
“Volatility in oil and gas in the first few weeks of the event increased by roughly 300 per cent. It’s an enormous victim of mispricing in terms of the view of how fast and how far the markets would move,” Barrack said.
Barrack added that previous energy crises had been dominated by traders’ efforts to track “physical flows” but now oil market participants had to monitor a “stream of information from social media companies” including from Trump.
“You need to understand that the market is moving [based on] this information,” Barrack said, adding that traders also needed to bear in mind “the fact it may not be fully thought through”.
He said the Trump administration was in close contact with traders to try to determine the impact of the conflict on the markets. “They have done a phenomenal job of understanding and staying in touch with all the relevant people in the industry,” he said. “They understand the mechanics of the market very well. The administration is the one who is sitting with more information than anybody in this room.”
But he said the White House had been too confident in its ability to calm prices by releasing oil from the US Strategic Petroleum Reserve, offering naval escorts for ships through the Strait of Hormuz, and by backstopping marine insurance. “That was a little under-thought,” he said.
Oil prices soared to nearly $120 a barrel in early March after Iran responded to US and Israeli strikes by seeking to close the Strait of Hormuz, almost halting marine traffic through a choke point that carries 20 per cent of global crude production.
Since then, Trump’s social media posts or comments in interviews have triggered huge swings in energy markets. Crude prices plunged on March 23 after the president touted “productive” talks with Iran in a post on Truth Social. Two weeks earlier Trump prompted another massive energy sell-off by saying the war was “very complete”.
Barrack also said that oil and gas traders “did a pretty bad job” of sizing up the risk of major market dislocation resulting from the outbreak of war in the Middle East.
The conflict “was a very well-telegraphed potential risk” with a 50 to 70 per cent probability of occurring at some point this year, he said.
Ahead of the war, Citadel had struggled to find areas in which it had information that gave it a trading advantage — although he indicated the firm had bet on rising prices for oil “distillates”, which include diesel, jet fuel and heating oil.
“We actually don’t think there was much informational advantage that could have been achieved outside of literally being in the administration itself,” Barrack said. “It was more of a low-skilled betting environment. The market had priced those probabilities pretty well [ . . . ] There were plenty of people we know in the industry who decided to take bets,” he said, but noted that “the results have been incredibly varied”.
As the conflict in Iran began, Barrack said his team had gone into “deep research mode” to draw up a comprehensive model of how supply and demand for energy in every region of the world would be impacted so that they could take advantage of any trading opportunities. “They open up and close extraordinarily quickly because markets are so responsive,” he said.
