Oil prices may exceed $140 a barrel this year if Asian economies fully re-open after Covid-related lockdowns, according to hedge fund manager Pierre Andurand.
Even with a weak macroeconomic background this year, oil demand could grow by more than 4 million barrels a day, or about 4%, roughly double the amount expected by leading forecasters, Andurand said in an interview. The trader’s main commodities fund capped a third year of stellar gains in 2022 with an advance of 59%.
“I think oil will go upwards of $140 a barrel once Asia fully reopens, assuming there will be no more lockdowns,” Andurand said. The “market is underestimating the scale of the demand boost that it will bring.”
Crude prices have had a shaky start to the year, retreating 8% as China’s reopening brings a surge in Covid cases and fears persist over a potential recession in the US. Brent futures traded near $79 a barrel in London on Friday.
The Andurand Commodities Discretionary Enhanced Fund returned about 59% last year, paring gains that reached 160% at one point. The performance still marks a strong three-year run, following advances of 154% and 87% in 2020 and 2021, respectively. The firm’s total assets under management have climbed to about $1.4 billion from $950 million at the beginning of last year.
“The reason why jet demand is still 2.5 million barrels a day below 2019 levels is because China has not reopened yet, and other Asian countries have only just started reopening,” Andurand said.
Oil rallied in the first half of 2022 as supply “barely grew” while demand recovered, and worries emerged over Russian exports following its invasion of Ukraine, Andurand said. The trader had said last year that oil might reach $200 a barrel in the wake of Russia’s invasion of Ukraine.
Brent crude rose as high as $139 in March. Prices then weakened in the second half because of a 4 million barrel-a-day surge in supply, coupled with weaker demand in China and countries of the former Soviet Union, he said.
Andurand’s success underscores the massive profits some traders have made as supply-chain disruptions and Russia’s invasion of Ukraine triggered a rally in oil and other commodities. Russian exports are poised to slump 1 million barrels a day from pre-invasion levels as sanctions take a toll, he predicts.
–With assistance from Ben Bartenstein.
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