FT/HL article.14 Feb 2023 06:18
Article originally published by The Financial Times. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.
Andurand, whose energy focused hedge funds have enjoyed three bumper years of returns during the coronavirus pandemic, said he had closed out all his positions in natural gas markets because last year’s price surge to record levels was unlikely to be repeated, with Europe learning rapidly to live without Russian gas.
Deep cuts to Russian gas exports in retaliation for western support for Ukraine drove the European benchmark price above €300 a megawatt hour in August, more than 10 times its normal level. But in recent months it has tumbled back to about €50/MWh — still historically high but far more manageable for European economies mired in a cost of living crisis.
“I think Putin lost the energy war,” Andurand said in an interview with the Financial Times. “Very high natural gas and power prices in Europe were extremely bad for the world economy but now they have come back to a more reasonable level. If gas prices stay here there will be much less worry about inflation and interest rates rises. There’s no more fear of an energy crisis.
“Now that Europe is getting used to living without Russian gas why would they ever go back?” he added.
If correct, the French kick-boxing enthusiast’s call spells the end of one of the most lucrative hedge fund trades of recent years. Some managers made significant profits from rocketing European gas prices after Russia began squeezing supplies to Europe in 2021 before slashing exports after its full-scale invasion of Ukraine last February.
Andurand, whose firm Andurand Capital manages $1.4bn in assets, saw his Commodities Discretionary Enhanced fund gain some 650 per cent from the start of 2020 until the end of last year. The former Goldman Sachs and Vitol energy trader made his name by calling many of the big moves in oil and other energy commodities over the past two decades, including oil prices turning negative during the early stages of the coronavirus pandemic.
Andurand, whose fund is down 3 per cent so far in 2023, said Putin had erred in cutting gas exports to Europe last year, as although he succeeded in driving prices higher temporarily he had underestimated buyers’ ability to adapt.
“I think it was a massive miscalculation over who had the leverage by Putin, in the same way he miscalculated how Ukraine would fight back and the west would be united,” Andurand said.
“Russia has lost its biggest customer forever, and it will take at least a decade to bring enough pipelines [to redirect those gas sales] to Asia. Once Russia can only sell gas to China, Beijing will be in a position to decide the price.”
While Andurand argued the gas and power crisis was coming to an end, he still said there
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