Reluctance of energy companies to invest in new production meant soaring prices a real possibility
Pierre Andurand, one of oil’s most prominent hedge fund managers, said the current reluctance of energy companies to invest in new production meant $300 a barrel was "not impossible" within a few years.
Andurand, who’s often espoused bullish views, said in a series of tweets on Sunday that concern about the impact of electric vehicles on future demand was limiting investment in projects with long lead times.
"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".
The hedge fund manager, who runs oil-focused Andurand Capital Management LLP, also went against the conventional view that triple-digit oil prices will dampen demand growth.
"So no, $100 oil will not kill the economy," he wrote. "And we need +$100 oil to encourage enough investments outside of the US."
A spokesman for Andurand declined to comment on the tweets.
His comments on demand echo those of Saudi Oil Minister Khalid Al-Falih, who earlier this month suggested that prices could rise further from their current level close to $75 a barrel without doing economic damage.
“We have seen prices significantly higher in the past, twice as much as where we are today”, and the global economy has the ability to absorb costlier crude, Al-Falih said. In 2008 Brent crude rose to nearly $150 a barrel, before crashing.
Andurand was among top commodity hedge fund managers who met with Al-Falih in July in London to discuss the state of the oil market. The Organization of Petroleum Exporting Countries and its partners plan to maintain their production cuts this year, which have helped to boost oil prices.
Andurand posted a near 10 percent drop in the first two months of the year as his fund stumbled against a background of zig-zagging energy prices, according to people familiar with the matter. The fund made money in March, one of the people said, asking not to be named discussing private data.
He launched his hedge fund in 2013 and has been positive every year since.