According to Pierre Andurand, one of the best energy merchants in the world, Russian President Vladimir Putin has “lost the energy battle” and the worst of the European gas and electricity crisis is over.
With Europe quickly adapting to life without Russian gas, Andurand, whose energy-focused hedge funds have seen three bumper years of returns during the coronavirus pandemic, claimed he had closed out all of his positions in natural gas markets. He said this because he did not expect the price surge to record highs of last year to occur again.
In an interview with the Financial Times, Andurand stated, “I think Putin lost the energy battle.
The Commodities Discretionary Enhanced fund managed by Andurand, whose company is responsible for $1.4 billion in assets, witnessed a gain of around 650% from the beginning of 2020 to the end of the previous year. The former energy trader at Goldman Sachs and Vitol built his fame by correctly predicting a number of significant changes in oil and other energy commodities over the previous 20 years, notably the swing in oil prices during the early stages of the coronavirus epidemic.
Andurand, whose fund is down 3% so far in 2023, claimed that Putin made a mistake by reducing gas supplies to Europe last year because, although temporarily raising costs, he misjudged consumers’ capacity for adaptation.
Andurand stated, “I think that was a major miscalculation by Putin as to who had the leverage, just as he overestimated how Ukraine would fight back and the west would be unified.”
It will take at least ten years to build enough pipelines to divert those gas shipments to Asia, which means that Russia has permanently lost its largest consumer.
Andurand claimed that even if the gas and electricity crisis was over, there was still a chance for significant changes in the commodity for which he is most known. He claimed that oil prices had dropped too low recently and were about to rise as China’s economic recovery after the end of its zero-Covid policy picks up speed.
Andurand predicted that oil would reach $140 a barrel later in 2023, claiming that the market is taking a perspective that is too short-term due to losses from the previous year as well as the increasing dominance of multi-manager and quant hedge funds.
As prices plummeted in the second half of last year, Andurand said, “The openness of China is going to lead to a lot more oil demand growth than projected.” However, he said that in mid-December, he had increased his bets on oil.
“It might take a few months for the market to recognize the scale of the demand increase we’re seeing,” he continued, arguing that Chinese-led global consumption could increase by up to 4 million barrels per day this year, compared to an average annual growth rate of just over 1 million barrels per day.
When adjusted for inflation, $140 was “not a crazy high price,” Andurand said, noting that oil’s all-time top of $147 a barrel came 15 years ago. “That would indicate pretty huge inventory draws and the market will get very tight.”
Shortly after Russia invaded Ukraine last year, the price of oil momentarily rose to $139 per barrel. However, it has since dropped down to $83 per barrel as it became evident that the impact of western sanctions on the amount of Moscow’s oil shipments had been very little.
Andurand declared that he was not counting on the recent tightening of western sanctions against Russia to raise the price as he predicted that the measures were unlikely to remove too many barrels from the market and that Moscow would choose to sell its oil at a discount to attract new customers in Asia.
As Russia has demonstrated a willingness to transfer the barrels even at extremely low prices, Andurand added, “I don’t want to bet on a significant disruption of the supply from Russia.”
“My basic case is that there won’t be a significant supply interruption from Russia, and I’m more interested in the implications of China and Asia’s openness as a whole.”