$70 to $80 Brent !7 Feb 2021 20:23
ickel
TORONTO, Feb 7 (Reuters) - Hedge funds are turning bullish
on oil once again, betting the pandemic and investors'
environmental focus has severely damaged companies' ability to
ramp up production.
Such limitations on supply would push prices to multi-year
highs and keep them there for two years or more, several hedge
funds said.
The view is a reversal for hedge funds, which shorted the
oil sector in the lead-up to global shutdowns, landing energy
focused hedge funds gains of 26.8% in 2020, according to data
from eVestment. By virtue of their fast-moving
strategies, hedge funds are quick to spot new trends.
Global oil benchmark Brent has jumped 59% since
early November when news of successful vaccines emerged, after
COVID-19 travel curbs and lockdowns last year hammered fuel
demand and collapsed oil prices. Last week it hit pre-pandemic
levels close to $60 a barrel.
U.S. crude has climbed 54% to around $57 per barrel
during the same period.
"By the summer, the vaccine should be widely provided and
just in time for summer travel and I think things are going to
go gangbusters," said David D. Tawil, co-founder at New
York-based event-driven hedge fund, Maglan Capital, and interim
CEO of Centaurus Energy.
Tawil predicted prices of $70 to $80 a barrel for Brent by
the end of 2021 and is investing long independent oil and gas
producers.
Hedge funds' bullish bets come despite the International
Energy Agency warning in January a spike in new coronavirus
cases will hamper oil demand this year, and a slow economic
recovery would delay a full rebound in world energy demand to
2025.
Normally, oil producers would ramp up production as prices
increase, but a move by environmentally focused investors from
fossil fuels to renewables and caution by lenders leaves them
hard-pressed to respond, hedge funds and other investors say.
The pace of output recovery in the United States, the
world's No. 1 oil producer, is forecast to be slow and will not
top its 2019 record of 12.25 million barrels per day (bpd) until
2023. Production in 2020 tumbled 6.4% to 11.47 million bpd.
The Organization of the Petroleum Exporting Countries, which
has also revised down demand growth, however, still expects
output cuts to keep the market in deficit throughout 2021.
"We are going to see some incredible oil prices over the
next couple of years, incredibly hot," said Tawil.
'BULL MARKET'
Global crude and condensate production was down 8% in
December from February 2020, prior to the pandemic's spread
accelerating, according to Rystad Energy.
North America's output was down 9.5% and Europe's production
declined just 1% over the same time period.
U.S. sanctions against Venezuela and declining oilfields in
Mexico have kept oil output from Latin America sluggish.
Some banks are forecasting the United States, which leads
with the number of COVID-19 cases, to reach herd immunity by
July, which would g
Sign In
Follow the stocks
