Odd Lots Pierre Andurand on How We Might Get $200 a Barrel Oil
Mar 17, 2022
Pierre Andurand, founder of Andurand Capital Management, shares his insights on the tumultuous energy markets. He discusses the looming possibility of crude oil prices reaching $200 per barrel, driven by tight supply and geopolitical tensions. Andurand delves into the impact of Russia's invasion of Ukraine on commodities pricing and the challenges traders face. He highlights the underinvestment in oil production and the potential ramifications for global economies, making a compelling case for the enduring volatility of the energy sector.
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Unique Market Conditions
- The current oil market situation is unprecedented in recent decades due to low inventories and spare capacity.
- The market's extreme backwardation, where front-month contracts are far more expensive than later ones, highlights its physical tightness.
Andurand's Investment Strategy
- Pierre Andurand's commodities fund isn't inherently bullish or bearish, but focuses on large price moves.
- They invest using futures contracts and options, aiming to profit from market volatility rather than predicting long-term trends.
Physical Oil and Speculation
- Physical oil availability is crucial for price discovery and market function.
- Speculators play a key role in preventing extreme price swings by responding to inventory levels.