From his spare office over a grocery store in Geneva, Conrad Gerber can sway world oil markets. Mr Gerber runs a small firm, Petro-Logistics, that collects and analyses data on the world’s supplies of oil. His confidential reports, which cost his select list of clients as much as $ 5,000 a month, often find their way into the business press, typically causing jumps or dips in the volatile petroleum markets.
Mr Gerber freely admits that he first learned about the oil business in the 1970’s when he was helping his country, then known as Rhodesia and now called Zimbabwe, to circumvent international sanctions and procure illegal oil. Combining the skills of a contraband trader with those of a spy, he acknowledges that his company uses tricks from intelligence work to pierce the curtain of secrecy raised by oil-producing countries, especially the members of OPEC in the Persian Gulf.
“All the countries in the gulf have their secrets,” Mr Gerber said, “but we have managed to penetrate that obscurity.”
Mr Gerber’s ability to move markets is well known. “Petro-Logistics estimates have a significant market impact, as they are widely recognized as an important source on OPEC supply,” said Fatih Birol, the chief economist for the International Energy Agency, an organization based in Paris that is one of Mr Gerber’s clients.
In a recent sign of Mr Gerber’s influence, oil prices rallied in the futures market after word leaked to the news media of his estimate of June OPEC production — a sizable drop from the previous month, particularly in production from Saudi Arabia. That a small player like Mr Gerber can have such substantial influence on a market as strategic as world oil is an indication of how opaque that market is.
There is no official measurement of worldwide oil supply or demand. Many major oil-producing countries guard information about their output as state secrets, and regard leaks as breaches of national security.
There have been attempts to bring greater clarity to the process: the International Energy Agency, an association of Western oil-consuming countries, collects and publishes data from its members, as an indicator of demand. Information on production in the North Sea is so transparent that Mr Gerber says he does not devote any resources to the area.
But the gulf countries in OPEC, which control most of the world’s oil reserves, are a black hole. Every month OPEC publishes an estimate of how much oil its members produce. But it does not obtain the data from its members, relying instead, it says, on “secondary sources.” Even an OPEC spokesman, Abdul Rahman Alkheraigi, acknowledged that the group’s production estimates lack credibility. “They are not reliable, so to speak,” he said.
Petro-Logistics, meanwhile, “is very well connected in the gulf and the Black Sea,” said David Knapp, the senior editor for global markets at the Energy Intelligence Group, a publishing and information services company. Mr Knapp used to work at the International Energy Agency, where he said he relied on Mr Gerber’s reports.
Mr Gerber said that his technique is simple. He tracks tanker loadings at major oil ports, relying on a network of about two dozen closely guarded sources. The tanker data is combined with tips from oil executives and synthesized into regular reports for his clients.
Tracking oil shipments is risky. Some countries — including Kuwait, according to Mr Gerber and others in the trade — prohibit reporting vessel data. Ten years ago, Mr Gerber said, a tracker in the Persian Gulf disappeared after a Petro-Logistics report on oil production was seen by officials of a state-owned oil company in the region. Mr Gerber declined to say what happened to his tracker, but an associate said he was presumed dead. Mr Gerber identified the country, but asked that its name be withheld, saying he still does business there.
After that incident, Mr Gerber said, he put in place procedures to stop unauthorized leaks of his most closely held data. One leak prevention technique involved an intelligence trick he called “the old canary trap,” in which he imperceptibly altered each document given to clients as a way to identify those who leaked a report. Since putting the canary trap in place, Mr Gerber said, he has not lost any other trackers.
Mr Gerber worked as an economist in the government of Rhodesia. He started his company in 1980, shortly after the United Nations lifted sanctions against the country. Among his business associates and friends, Mr Gerber counted Theodore G. Shackley, one of the CIA’s most famous spymasters, who led efforts to battle Fidel Castro when he was station chief in Miami in the early 1960’s. Mr Shackley engaged in some oil trading after he retired from the CIA in 1979. Mr Gerber said he was at Mr Shackley’s bedside just before he died last year.
His client base, initially built around an oil trader who worked with Mr Shackley, eventually expanded to include official agencies, major oil companies — both private and government-owned — and other traders. His clients may use his reports to profit in the crude oil futures markets. Mr Gerber says he does not trade himself.
Mr Gerber’s reports do not always prove correct. Unlike most analysts, he tries to estimate OPEC’s production before the month is over, which makes his information more valuable but less certain. His estimates of Saudi production in April had to be revised upwards by about 7 % after “final data” was received, Mr Gerber said.
But even a large agency like the International Energy Agency can make big mistakes. In June, the agency added 79 mm barrels to its March estimate of oil inventories, a change that pushed oil prices sharply lower.
Petro-Logistics is not the only group to rely on tanker tracking for supply data. Lloyd’s Marine Intelligence Unit, part of the Informa Group, uses a network of 900 agents at 2,000 ports and cities, said Andrew Lorimer, manager of oil trade analysis for the unit, which is based in London. Lloyd’s also publishes an estimate for seaborneoil on a regular basis.
Increased transparency by oil producers, Mr Gerber acknowledges, could hurt his business — and also diminish the challenge of the hunt for data. “Those people who really need to know what’s going on can find out,” Mr Gerber said.
