Pierre Andurand’s bullish oil trade pays off handsomely. Pierre Andurand’s fund was up 16.3% to May 18 compared with the average hedge fund’s return of just 0.1% So Pierre Andurand comfortably secures his heavyweight title as the world’s top oil trader.
Indeed, some of our regular readers of World Top Investors might recall a piece entitled Pierre Andurand speculates crude oil prices $100 dollars a barrel in 2018, dated January 24.
Fast forward to today and Pierre Andurand’s bullish oil trade is bang on the money.
International oil prices have rallied by 68% since last June’s low.
But you can count the number of big oil traders on one hand who stuck it out like Pierre Andurand and rode out the bullish oil money wave all the way to the bank.
“Pierre Andurand’s bullish oil trade pays off handsomely. Pierre Andurand’s fund was up 16.3% to May 18 compared with the average hedge fund’s return of just 0.1%”
Pierre Andurand’s bullish oil trade is a classic example of variant perception investing, simply a different way of looking at things. It is a recurring theme of heavyweight investor champions, they are the alpha contrarians (rebels with a cause) who bet the other way and get it right.
The consensus view, back when Pierre Andurand’s bullish oil trade was considered a losing bet, was that the oil glut would continue to depress oil prices. Moreover, many argued that the global economy was coming under headwinds from protectionism and a policy shift in the central bank’s monetary policy towards rate normalization.
All the above undercurrents were clearly visible on the investment landscape and many financial writers were flagging the warning signs.
Astenbeck’s fund manager Andy Hall turned bearish on oil and closed his fund in August with oil at about $50 a barrel, less than half its 2014 high. The bearish view at the time which was also the consensus was that oversupply would keep a lid on prices.
“When you start losing money, you start questioning even more than usual. You think, ‘maybe there’s something I’m missing”
PIERRE ANDURAND
But Pierre Andurand’s bullish oil trade suggests that the world’s top oil trader could see something else playing out in the oil market that was invisible to most other traders.
Pierre Andurand’s bullish oil trade in the trader’s own words had been “excruciating”.
For much of last year, former Goldman Sachs energy trader’s looked wrong as most analysts were pointing to oversupply as the main factor for keeping a lid on prices.
“Emotionally it’s very difficult” said Pierre Andurand. “When you start losing money, you start questioning even more than usual. You think, ‘maybe there’s something I’m missing’”
By the end of May 2017, Pierre Andurand’s fund had run up a 17% year-to-date loss, compared with oil’s 11.5% loss.
Nevertheless, Pierre Andurand’s bullish oil trade continued to dominate his fund’s position. Pierre Andurand held the view that strong demand for crude from a growing global economy and falling supply due to lack of investments led him to the conclusion that oil would recover.
“Sometimes you lose money, you take your loss, then you have to come and try again, and not many people can do that for a long time” – Pierre Andurand
Indeed, perhaps that is why only a handful of oil traders have benefited from hanging in there with Pierre Andurand’s bullish oil trade call.
But how will Pierre Andurand’s bullish oil trade play out going forward?
“People think $100 is high. But we’ve seen $100, we’ve seen $150 in a much weaker economic environment [2008] than today and I think today is much more bullish” he said. “I don’t think we’re close to the top at all”. We could see $100 oil this year… $150-plus in 2020-2021” said Pierre Andurand.
But could Pierre Andurand’s bullish oil trade position be overstaying its welcome?
Stay tuned.
