Its Time to Invest in Oil Development Says Hedge Fund Manager

April 30, 2018 James Heinsman In the News

Drilling platform “Iran Khazar” in use on a production platform in the Cheleken of Dragon Oil Field (Turkmenistan). Photo courtesy

One of the most respected hedge fund managers in the oil sector, Pierre Andurand, said that today’s general avoidance of investing in new oil production could lead to oil prices going to $300/barrel within just a few years.

Andurand tweeted his viewpoint on Sunday. Known for his usually bullish approach to investing, he explained that people are reluctant to invest in projects with long lead times due to the emergence of electric cars, which many view as eventually lowering demand for oil.

“So paradoxically these peak demand fears might bring the largest supply shock ever,” he wrote. “If oil prices do not rise fast enough, $300 oil in a few years is not impossible.”

He also expressed his view, contrary to the accepted standard opinion, that such high oil prices will slow the growth of demand for oil.

“So no, $100 oil will not kill the economy,” he tweeted. “And we need +$100 oil to encourage enough investments outside of the U.S”

Andurand’s viewpoint is similar to that of the Saudi Oil Minister Khalid Al-Falih. A few weeks ago, Al-Falih hinted that prices could keep rising above today’s $75/barrel and not do much damage.

“We have seen prices significantly higher in the past, twice as much as where we are today,” Al-Falih said. And the global economy absorbed the high price, keeping up until it hit $150/barrel, and then crashed.

Andurand met with Al-Falih last July in London, along with other top commodity hedge fund managers to discuss the situation in the oil market. OPEC, the Organization of Petroleum Exporting Countries, and its partners announced that they plan to keep production down this year, which has helped to increase prices.

Andurand’s fund lost almost 10 percent of its value during the first two months of the year due to unstable energy prices but made money in March. Launched in 2013, Andurand Capital Management LLP has made money every year since its inception.

electric cars, Khalid Al-Falih, OPEC, Pierre Andurand,

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