Speaking in a recent interview with the Financial Times (FT) in London, Andurand said that oil could hit $140 a barrel later this year, with Chinese demand up by as much as four million barrels a day, four times the typical level of annual growth. That would result in large inventory draws and a sharp hike in oil prices, said the hedge fund manager, a former energy trader with Goldman Sachs and Vitol.
So far this year, Brent crude has risen slightly, strengthening last week to close at around $86, partly buoyed by Russia’s announcement that it will cut oil production by 500,000 barrels per day (bpd) in March. Opec sources have been quoted, suggesting that crude could climb to $100 in the weeks ahead. But Andurand’s prediction is far more dramatic.
If his prognosis proves correct, further pressure would be placed on economies already struggling with a cost of living crisis. Shipping’s fuel costs would also rise dramatically, adding to the inflationary mix.
“The reopening of China is going to lead to a lot more oil demand growth than expected,” Andurand told the FT. “It might take a couple of months for the market to recognise the scale of the demand increase we’re seeing.”
Andurand has closed out his positions in natural gas based on the belief that the unprecedented surge in European prices last year to above 300 per megawatt-hour in August, more than ten times higher than usual, will not happen again. Prices remain high, at about $50 per megawatt hour, but the analyst believes that Europe has adapted to life without Russian gas more quickly than expected.
Listen to an episode of the Seatrade Maritime Podcast on the commodities market outlook
“Very high natural gas and power prices in Europe were extremely bad for the world economy,” he said, “but now they have come back to a more reasonable level. If gas prices stay here there will be much less worry about inflation and interest rates rises. There’s no more fear of an energy crisis.”
Andurand’s firm, Andurand Capital, manages about $1.4bn in assets and gained around 650% in the three years between the start of 2020 and the end of 2022.