Hedge funds bet on oil ‘big comeback’ after pandemic hampered producers By Reuters


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By Maiya Keidan and Rod Nickel TORONTO (Reuters) – Hedge funds are turning bullish on oil once again, betting that the pandemic and investors ‘environmental focus has severely damaged companies’ ability to increase investment. production. Such supply constraints would push prices to multi-year highs and keep them there for two years or more, several hedge funds said. The sentiment is a reversal for hedge funds, which shortened the oil sector in the run-up to global shutdowns, gaining energy-focused hedge funds 26.8% in 2020, according to data from eVestment. By virtue of their fast-moving strategies, hedge funds quickly detect new trends. The global oil benchmark has risen 59% since early November, when news of successful vaccines emerged, after COVID-19 travel restrictions and blocks last year hit fuel demand and collapsed oil prices. Petroleum. Last week it reached pre-pandemic levels close to $ 60 a barrel. it is up 54% to around $ 57 a barrel over the same period. “By the summer, the vaccine should be widely distributed and just in time for summer trips, and I think things are going to get crazy,” said David D. Tawil, co-founder of the event-driven hedge fund based in New York, Maglan. Capital, and Acting CEO of Centaurus Energy (OTC :). Tawil predicted prices of $ 70 to $ 80 a barrel for Brent by the end of 2021 and is investing in independent oil and gas producers for a long time. The hedge fund’s bullish bets come despite the International Energy Agency’s warning in January that a surge in new coronavirus cases will hamper oil demand this year, and a slow economic recovery would delay a full rebound. on global energy demand through 2025. Normally, oil producers would increase production as prices rise, but a move by environmentally-focused investors from fossil fuels to renewables and the caution of Lenders leave them hard-pressed to respond, hedge funds and other investors say. The pace of recovery of production in the United States, the world’s number one oil producer, is expected to be slow and will not exceed its 2019 record of 12.25 million barrels per day (bpd) until 2023. Production in 2020 it fell 6.4% to 11.47 million bpd. However, the Organization of the Petroleum Exporting Countries (OPEC), which has also revised demand growth downwards, still expects production cuts to keep the market in deficit during 2021. “We are going to see incredible oil prices. in the next few years, incredibly hot, “said Tawil. ‘BULL MARKET’ Global crude oil and condensate production fell 8% in December compared to February 2020, before the spread of the pandemic accelerated, according to Rystad Energy. North American production declined 9.5% and Europe production decreased just 1% during the same period. US sanctions against Venezuela and the decline in Mexico’s oil fields have kept Latin America’s oil production slow. Some banks forecast that the United States, which leads in the number of COVID-19 cases, will achieve herd immunity in July, greatly stimulating demand for oil, said Jean-Louis Le Mee, director of the London-based hedge fund. Westbeck Capital Management. , which is a mix of oil futures and stocks. “Oil companies are likely, for the first time in a long time, to make a big comeback,” he said. “We have all the ingredients for an extraordinary oil bull market in the next few years.” In the United States, hedge funds increased their allocation to Exxon Mobil Corp (NYSE 🙂 by 21,314 shares in the third quarter, the most recent US filings compiled by Symmetric.io showed. Hedge funds added an additional 9,070 shares of top US companies ConocoPhillips (NYSE 🙂 and 4,144 of Chevron Corp (NYSE 🙂 during the same period. On the other hand, shorting activity at BP (NYSE 🙂 PLC fell by 16 million shares on February 4, but increased slightly at major European oil company Royal Dutch Shell (LON 🙂 Plc by 1.9 million shares, based on data from FIS Astec Analytics. Some investors remain skeptical of Canadian oil companies, among the world’s most carbon-intensive producers, although they are recovering faster from the pandemic than the United States. Current short positions increased in 10 of the 14 Canadian oil companies on the Toronto energy index during the second half of January, according to documents reviewed by Reuters. US shale production will not recover quickly, given the required capital and debt producers, supporting oil prices, said Rafi Tahmazian, senior portfolio manager at Calgary-based Canoe Financial LP. North America’s oil services sector, which producers depend on to drill new wells, has been decimated, he said. “They are beheaded for growth,” Tahmazian said. “The supply side is broken.”