Guru watch

“I don’t think that suddenly they stop fighting, the oil comes back... The oil’s going to be gone for good,” says commodities trader Pierre Andurand, founder of Andurand Capital. He tells Bloomberg’s Odd Lots podcast that he expects crude oil prices to soar to $200 a barrel by year-end as rival producers struggle to replace Russian supply.

Andurand made millions by shorting oil when prices turned negative in April 2020, as a pandemic-driven supply glut overwhelmed physical storage capacity. He believes that the situation has now dramatically reversed. Sanctions placed on Russia after its invasion of Ukraine have removed around four million barrels a day from circulation, and that will be hard to replace.

For example, US shale oil supply has been limited, partly because “a lot of the easy oil in the US has been drilled... I’m not sure there’s room for... many decades of high production”. There’s also the question of investors’ reluctance. “The whole industry had burned through $600bn of cash and the shareholders had taken a big hit.” Now that they are making profits, shareholders are pressurising chief executives not to grow production too fast in case “prices crash again”.

All of these factors make a supply response – beyond short-term releases from strategic reserves – very challenging. That’s why the price has to rise to around $200 a barrel because that’s the level at which “demand destruction” will kick in, says Andurand, which will also help “to accelerate the energy transition”.