You have to hand it to hedge fund managers. At the sight of the slightest uptick in crude prices, whether driven by geopolitics, OPEC's shenanigans or dare we say – actual supply and demand dynamics – hedge funds and money managers tend to pile in with long calls in the hope of extending the rally.
However, when it's a case of all of the above market factors, some tend to get overexcited. Pierre Andurand, whose Andurand Capital Management is often bullish on oil and has been down on its luck for the first quarter of 2018 (according to Bloomberg), is certainly among the excitable creatures.
Earlier this week, in a succession of now deleted tweets, Andurand quipped that concerns over the rise of electric vehicles was keeping investment in upstream oil projects muted thereby extending their lead times over fears of peak demand.
"So paradoxically these peak demand fears might bring the largest supply shock ever. If oil prices do not rise fast enough, $300 oil in a few years is not impossible," he added.
Having grabbed the attention of the crude markets, the tweets, of course, were subsequently deleted with no explanation. The Oilholic has an explanation – perhaps rational thinking returned?
Perhaps a realisation that OPEC's lowering of output has to end at some point? Or perhaps a realisation that the US rig count continues to rise in tandem with American barrels? Or even perhaps a realisation that much of oil demand – as the International Energy Agency notes – is driven by petrochemicals and aviation. In fact, even if one in every two cars is electric, oil demand would still rise.
Anyway, why should rationality get in the way of a provocative tweet. Or make that a deleted provocative tweet.
For the record, the Oilholic reiterates his average oil forecast range of $65-75/bbl for Brent for 2018, which is a tad higher than that of many fellow bears in the range of $60-70/bbl, given there still is plenty of oil in the market, and the crude mix of light and heavy is keep the global pool well supplied.
To provide, some content the Brent front month contract closed just shy of $75/bbl on Friday (see chart above, click to enlarge), still in its painfully dull range, albeit lurking near the highest level since November 2014. So only another $225 to stack up in a matter of years Pierre, if the bears get your bullish fever! That's all for the moment folks! Keep reading, keep it ‘crude’!
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To email: gaurav.sharma@oilholicssynonymous.com
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