For the hedge fund managers most bullish on oil, OPEC’s agreement to cut output paid off handsomely.
Andy Hall’s Astenbeck Capital Management LLC fund surged 8.1 percent in December, according to an investor letter. Pierre Andurand’s Andurand Capital posted a 6.8 percent gain, said a person familiar with the performance who asked not to be identified because the information isn’t public. The accord at the end of November, followed by pledges from 11 non-OPEC producers to curb supply, sparked a rally in oil futures. For the year, Hall was up 26 percent and Andurand gained 22 percent. The hedge fund industry posted an average gain of 4.4 percent last year, according to Hedge Fund Research Inc.
Andurand, who correctly called the top of the oil market in 2008, said last month that OPEC and Russian production curbs will lead to large inventory declines sooner than anticipated, spurring higher prices. An Organization of Petroleum Exporting Countries deal to restrain production “even temporarily,” will reduced global inventories and send prices higher, Hall said in a Nov. 1 letter to investors obtained by Bloomberg News.
OPEC agreed on Nov. 30 in Vienna to reduce output by 1.2 million barrels a day to 32.5 million for six months starting in January. On Dec. 10, the group was joined by other producers, including Russia and Kazakhstan, who pledged to trim supply by 558,000 barrels a day.
Brent oil touched $58.37 a barrel on Jan. 3 while West Texas Intermediate reached $55.24 the same day, the highest prices for each grade since July 2015.
Andurand, who has been bullish on crude for the past year, correctly called the slump to the mid-$20s in the first quarter of 2016 and the subsequent recovery. The founder and chief investment officer of Andurand Capital Management LP said last month that he sees $70 oil in the first half of 2017, with a rise to $100 possible again by the end of the decade.
London-based Andurand manages $1.65 billion, while Astenbeck Capital Management, which Hall runs out of Southport, Connecticut, has $2.4 billion. Hall didn’t return a message seeking comment. Annabel Clay, a spokeswoman for Andurand, declined to comment.
To see Andurand’s Dec. 6 interview on Bloomberg TV, click here
Hall profited in the last decade by betting on the run-up and eventual crash of crude prices. His oil trader career stretched back to the 1970s, first for BP Plc and later at legendary trading house Phibro Energy Inc., where he was chief executive officer.
Not every commodities fund performed as well in 2016. Cumulus Fund, an energy and commodities hedge fund with $1.9 billion under management, plunged almost 30 percent in 2016 in its biggest ever annual loss, according to an investor letter.
The fund, managed by Peter Brewer, shed 12.5 percent in December alone. In a separate letter to investors, Brewer said that most of the year’s losses occurred in his own portfolio of European energy. A spokeswoman for the fund, which was bought by London-based asset manager City Financial Investment Co. in 2012, declined to comment.