TORONTO (Reuters) – Hedge funds are turning bullish on oil again, betting on the pandemic and investor environment has severely damaged the ability of companies to ramp up production.
Such a restriction on supply would push prices to multi-year highs and keep them there for two years or more, several hedge funds said.
This idea is a reversal of hedge funds, which shortened the oil sector before the global downturn, giving energy-focused hedge fund benefits of 26.8% in 2020, according to data from eVestment. As a result of their fast-paced strategies, hedge funds are quickly seeing new trends.
Brent, a global oil benchmark, has jumped 59% since early November when news of successful vaccines surfaced, after last year’s COVID-19 travel loops and locks hit demand. fuel and falling oil prices. Last week it hit pre-pandemic levels near $ 60 a barrel.
U.S. crude has climbed 54% to around $ 57 per barrel in the same period.
“Before the summer, the vaccine should be given widely and just in time for summer travel and I think things are going to go gangbusters,” said David D. Tawil, co-founder at an event-based hedge fund in New York, Maglan. Capital, and Interim CEO of Centaurus Energy.
Tawil was forecasting prices between $ 70 and $ 80 per barrel for Brent by the end of 2021 and is investing long-time independent oil and gas producers.
A hedge fund bullish bet comes despite a warning from the International Energy Agency in January that a spike in new coronavirus cases will dampen oil demand this year, while a slow economic recovery would delay a complete reversal in demand global energy to 2025.
Oil producers would normally ramp up production as prices rise, but a shift by environmentally focused investors from fossil fuels to renewables and a warning from lenders is putting them under pressure. response, hedge funds and other investors say.
The rate of product recovery in the United States, the world’s No. 1 oil producer, is expected to be slow and will not surpass its 2019 record of 12.25 million barrels per day (bpd) until 2023. Production fell in 2020 6.4% to 11.47 million bpd.
The Organization of the Petroleum Exporting Countries, which has also reviewed growth in demand, however, still expects product cuts to keep the market in deficit throughout 2021.
“We’re going to see amazing oil prices over the next year or two, very hot,” said Tawil.
‘BULL MARKET’
Global crude and condensate production was down 8% in December from February 2020, before the outbreak spread, according to Rystad Energy.
North American output was down 9.5% and European output fell just 1% over the same period.
U.S. sanctions against Venezuela and declining oil fields in Mexico have slowed Latin American oil production.
Some banks are forecasting the United States, which will continue the number of COVID-19 cases, to reach herd protection by July, which would greatly boost oil demand, Jean-Louis said Le Mee, head of hedge fund based in London-based Westbeck Capital Management, is far from a mix of oil futures and equities.
“Oil companies are likely to make a comeback for the first time in a short time,” he said. “Our products for the bull market are amazing in oil for the next few years.”
In the United States, hedge funds increased their distribution to Exxon Mobil Corp by 21,314 shares in the third quarter, the latest U.S. films compiled by Symmetric.io showed.
Hedge funds transferred 9,070 other shares of U.S. majors ConocoPhillips and 4,144 to Chevron Corp over the same period.
Elsewhere, cutting activity in BP PLC fell by 16 million shares on February 4 but increased slightly in major European oil Royal Dutch Shell Plc by 1.9 million shares, data from FIS ’Astec Analytics showed.
Some investors remain skeptical about Canadian oil companies, among the world’s most intense producers, even though they are kicking back faster from the pandemic than the United States.
Ordinary short positions in 10 out of 14 Canadian oil companies rose in Toronto’s energy index in the second two weeks of January, according to filters reviewed by Reuters.
U.S. coal production will not recover swiftly, with the required capital and debt-bearing agents, backing oil prices, said Rafi Tahmazian, senior portfolio manager at Canoe Financial LP based there. in Calgary.
The North American oilfield services sector, which is responsible for drilling new wells, has shrunk, he said.
“They are empowered from being able to grow,” Tahmazian said. “The supply side is broken.”
Additional statement by Nia Williams in Calgary; Edited by Denny Thomas and Marguerita Choy