Speculating on the price of oil is a favorite pastime in certain circles, and these include hedge funds. One prominent member of the hedge fund crowd this week said crude could rise to US$300 a barrel if current prices fail to rise further—and soon—to stimulate investments in new production.
Pierre Andurand, head of Andurand Capital Management LLP, wrote in a series of tweets that were later deleted that "If oil prices do not rise fast enough, $300 oil in a few years is not impossible," as quoted by Bloomberg.
Andurand seems to be one of a small group that also includes Saudi Energy Minister Khalid al-Falih, which believes prices can rise further, even to US$100 without affecting demand. Producers, Andurand said in the tweets, are afraid of peak oil demand resulting from the growing adoption of electric vehicles, and this is stopping them from investing in more new production. "So paradoxically these peak demand fears might bring the largest supply shock ever," Andurand said.
The hedge fund manager believes that crude oil should trade at more than US$100 a barrel to stimulate this much needed, in his view, investment, notably outside the United States where it is obvious that E&Ps are faring well with production growth even at current oil prices. Related: Venezuela Offers India 30% Discount On Oil...If It Pays In Cryptocurrency
It might be worth noting, as Bloomberg did, that Andurand’s fund posted a 10 percent decline in returns over the first two months of the year on the back of the seesaw in oil prices.
Most observers of the oil industry seem to be in disagreement with Andurand’s bullish views. After almost three years of cheap oil that spurred more buying from the largest importers in the world, a sharp price rise is likely to have an impact on every economy, especially oil-dependent ones, and this effect is unlikely to be in the form of higher oil demand.
In fact, some believe that the big winners from higher oil prices will be renewable energy and electric cars—especially the latter—as production costs there fall, and this makes them more competitive with ICE cars, even preferable in certain circumstances, possibly even bringing about that peak demand that E&Ps are so afraid of right now.
Please feel free to join the discussion on $300 oil here.
By Irina Slav for Oilprice.com
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