Sunday, November 20, 2016

Oil heading to $70 per barrel


Renowned oil trader and hedge fund manager Pierre Andurand believes there’s a 70% chance that OPEC will reach an agreement to curtail oil output soon and as a result, oil prices will “slowly trend upward” towards $60 to $70 by the end of 2017. Andurand, who’s Andurand Capital Management oversees manages $1.4 billion in its main strategy made these comments in the Andurand Commodities Fund October investor update, a copy of which has been reviewed by ValueWalk. For the month of October, the fund lost 3%. Year-to-date the fund has produced a return of 7.8% for investors. 


Non-OPEC production is falling, demand is rising and Andurand predicts that the US oil industry will not be able to maintain the cost deflation trend seen over the last few years as prices tick higher and demand for service equipment increases, which “leads us to believe that at $60/bbl, US shale growth will not be able to bridge the supply gap created by the $450 billion of cumulative capex cuts over the past few years.”

The capex cuts will eventually constrict supply sufficiently to allow for higher prices. I believe the oil price bottomed earlier this year and will be heading higher over time. 

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