December 18, 2015 / 4:53 PM / in 2 years

Oil trader Andurand up 8 percent on year; sees $25 oil by March

LONDON/NEW YORK (Reuters) - Prominent oil trader Pierre Andurand is betting crude prices will fall, possibly below $25 a barrel, in the first quarter of 2016, and has told his investors in his hedge fund he was ramping up bearish bets.

A gas nozzle is used to pump petrol at a station in New York February 22, 2011. Oil prices rose to their highest in 2-1/2 years on Tuesday as investors worried that the revolt in Libya could spread to top Middle East producers, as companies suspended operations and ports were disrupted. REUTERS/Shannon Stapleton

London-based Andurand Capital Management, which runs some $615 million, was up 8 percent in the year to Dec. 11, mostly from winning short bets on oil, a source familiar with the matter said on Thursday.

In a letter reviewing the fund’s performance through November, Andurand said he was convinced oil markets will grind lower in the next two to three months and was accumulating put positions to benefit from lower prices.

“Recent developments on the supply side continue to point toward inventory builds that will put pressure on oil prices to bring them further down to below $30/bbl (barrel) and possibly at/below $25/bbl in the first quarter of 2016,” Andurand wrote in the letter, seen by Reuters on Thursday.

Banks such as Goldman Sachs and Citigroup are among those that have said the global glut in oil could push crude to $20 levels, from highs above $100 seen in July 2014.

Leading crude benchmark Brent settled on Thursday at $37.06 a barrel, less than $1 above its 2004 low of $36.40.

U.S. crude’s West Texas Intermediate (WTI) futures closed at $34.95 a barrel, after hitting a seven-year low of $34.53 earlier in the week.

Andurand said he expected oil inventories to ramp up in the first half of 2016, and global supply to build at a rate of 1.6 million barrels a day.

“Such large builds could lead to a test of maximum storage capacity during the same period. This should result in significantly lower crude prices and a steeper contango of the WTI forward curve,” he said.

Contango refers to a market structure where forward oil shipments fetch a premium over crude for immediate delivery. Both Brent and WTI have been in contango for months as traders stored oil for future delivery.

Andurand, a former Vitol oil trader, previously ran the $2 billion BlueGold Capital, gaining over 200 percent in 2008 by correctly calling the spike and subsequent collapse of oil prices then. It lost money in 2011, the only year Andurand has done so, and closed in 2012 when he left to set up his own fund.

Andurand Capital, launched nearly three years ago, gained 25 percent in 2013 and 38 percent in 2014. A spokesperson for the fund declined comment when contacted by Reuters.

(This story corrects paragraph 11 to show that BlueGold made a loss in 2011 only)

Reporting by Simon Jessop; Editing by Rachel Armstrong and Cynthia Osterman

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