Oil prices could jump to an all-time high of $200 per barrel by the end of this year, as oil producers ranging from African members of OPEC+ to the U.S. shale patch will struggle to replace the Russian crude that is going off the market, popular hedge-fund manager Pierre Andurand told the latest episode of Bloomberg’s Odd Lots podcast.
Andurand, CIO at Andurand Capital, believes that around 4 million barrels per day (bpd) of Russian oil supply is already out of trade on the market after the financial sanctions against Russia over its invasion of Ukraine and after many Western majors and traders refuse to deal with Russia’s oil.
Even if Russia and Ukraine reach a ceasefire right now, Russian oil will not return, said Andurand.
“I don’t think that suddenly they stop fighting, the oil comes back. It’s not going to be the case. The oil’s going to be gone for good,” Andurand told the Odd Lots podcast.
“We’ll have to live with higher prices to keep demand down, for it to be treated a bit more as a luxury product and also to accelerate the energy transition,” said the hedge fund manager.
According to Andurand, the actual demand destruction would begin at $200 a barrel oil.
“I feel like there’s no demand destruction at $110 a barrel and we’ll have to go significantly higher before demand can go down by enough. But that’s also assuming there’s no government mandate and some kind of confinement, where let’s say two days a month, we are not doing anything,” he said.
Just after Russia invaded Ukraine, Andurand warned that the oil markets were worse off than many traders believe, The Wall Street Journal reported.
In the first week of March, options traders significantly increased bets that oil could hit $200 as early as this month. Traders would profit from those call options if oil prices were to rally to those levels.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- Oil Rebounds As Market Fears Russian Supply Shock
- Why Oil Crashed Back Below $100
- Huge Russian-Run Iraqi Oilfield May See Near-1 Million Bpd Output Boost