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Andurand’s Oil Hedge Fund Crashes After Oil Price Bet Goes Awry

After a wildly successful period amid soaring oil prices, legendary oil trader Pierre Andurand has seen his hedge fund suffer the worst ever loss after oil prices reversed course. Andurand’s main Andurand Commodities Discretionary Enhanced Fund, which makes leveraged bets, fell by another 7% in the current month through June 23 to bring year-to-date losses to 51%, a sharp contrast to the more than sevenfold return it recorded in the previous three years.

The fund, which Andurand runs with no set risk limits, has suffered catastrophic losses after Andurand earlier this year predicted that oil prices may exceed $140 a barrel by the end of 2023. Unfortunately, elevated inventory levels, rising supplies by Russia, Iran and Venezuela, weak global demand and sub-par recovery by the Chinese economy have all taken a toll on oil prices.

Surging volumes from Iran have been particularly worying. Iranian crude exports exceeded 1.5 mb/d in May, the highest level since 2018 despite the country still being under U.S. sanctions. Last month,Tehran said it has boosted crude output to above 3 million bpd, again the highest since 2018. Oil prices tanked after reports emerged that the U.S. and Iran are making progress after resuming talks on a nuclear deal, a move that could ease sanctions on Iran's oil exports. Israel's Haaretz newspaper reported that the talks are moving forward more rapidly than expected, with the possibility of a deal being struck in a matter of weeks. Deal terms are likely to include Iran ceasing its 60% and higher uranium enrichment activities in return for permission to export as much as 1M bbl/day of oil.

In early June, Goldman Sachs' oil ultrabull Jeff Currie once again lowered his Brent forecast for December, this time to $86 a barrel from $95 and $100 before that. Currie cited increasing supply from Russia, Iran and Venezuela; growing recession fears and persistent headwinds to higher prices from higher interest rates for his growing bearishness.

Analysts at Citi are also quite bearish, recently saying the Saudi cuts are unlikely to sustain a gain into the high $80s or low $90s thanks to lackluster demand and stronger non-OPEC supply by year-end.

By Alex Kimani for Oilprice.com

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  • Mamdouh Salameh on June 28 2023 said:
    The one thing oil trader Peirre Andurand may haven’t hedged against when he was predicting an oil price exceeding of $140 a barrel by the end of 2023 is a collapse of three US commercial banks early this year.

    Since then there has been persistent fears about the health of the US banking system and the possibility that further hikes by the US Federal Bank could cause a collapse of one or two more US banks thus triggering a global banking or financial crisis reminiscent of the 2008 subprime financial crisis.

    No matter how brilliant some oil traders could be, they can’t hedge against every eventuality in the global oil market. Volatility, susceptibility to global developments and unpredictability are all second nature of oil.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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