Oil prices are set to hit the $70 barrel mark later this year, according to Pierre Andurand, the managing partner at Andurand Capital Management that won 2017's EMEA Investor's Choice Award.
The general consensus among energy experts, on the other hand, puts the Brent barrel at $55 by the end of the year, and at $60 in the next 2 to 3 years.
"I think oil prices are likely to recover to around $70," Andurand told CNBC. "I think the market will switch to backwardation - sustainable backwardation - by late summer and that will bring the next wave in oil prices." The market phenomenon he referred to defines a pattern in commodity prices where short-term spot price oil contracts become more expensive than long-term forward contracts.
Andurand called the mid-2000s price crash, which caused the West Texas Intermediate (WTI) barrel to fall to a fifth of its original value. At the time, the commodities expert stood bearish, making his current prediction the subject of market intrigue.
"U.S. shale producers have been hedging a lot of their production, capping prices, so the improvements in fundamentals were not priced in at all, but I believe that now when people will really see that inventories are going down fast, that eventually the fundamentals will win and prices will go higher," he explained.
Related: OPEC Weighs Extension As Oil Markets Start To Lose Their Nerve
Regarding the Organization of Petroleum Exporting Countries' (OPEC) coming decision on the future of the bloc's production cuts, Andurand says the decision to extend the cuts for another six months will be based on price levels at the time of final negotiations. At $65 a barrel, the cartel is not likely to maintain the reductions, he added.
"I think we will be higher by [the time negotiations get serious] because it will be obvious to everybody that inventories are going down and the OPEC cut really worked," he added.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on… More
Comments
Inventories are going down - FAST . . . .???
This guy must have huge long positions . . . . . as have most hedge funds.
And oil futurs certainly don't indicate that we are heading to higher prices any time soon.
But if this would happen, I think we would see an adaption of EVs at a much faster pace than what we see now: India just announced that they want to be 100% EVs by 2030. A high oil price is sure going to accelerate this transition...