Andurand’s Hedge Fund Lost Big In Volatile Oil Markets

  • Feb 21, 2020
  • Oil Price

The main oil-focused hedge fund of one of the best known oil traders, Pierre Andurand, incurred an 8-percent loss in January, the Financial Times reported on Friday, quoting three people with knowledge of Andurand’s fund performance.  

Pierre Andurand manages Andurand Capital Management, one of the few oil-specializing hedge funds still out there. Andurand’s fund was a big winner of the oil price volatility in 2014 and 2016, but after that it suffered two consecutive years of annual losses in 2018 and 2019.

According to FT’s sources, Andurand’s losing streak extended into January this year.

Last month, volatile crude oil prices and the much lower-than-expected premium of diesel prices over high-sulfur fuel oil (HSFO) prices caught many traders by surprise, according to FT.

Before the January 2020 International Maritime Organization’s (IMO) rules that only 0.5-percent or lower sulfur fuel oil be used in ships, traders and market analysts had expected diesel prices to jump and HSFO prices to slump because of the new regulation. It turned out, however, that refiners were well prepared for the shift and produced enough diesel, but they produced less HSFO. Lower HSFO supplies led to the premium of diesel over HSFO to drop by nearly a third last month.

The wild swings in crude oil prices in January also led to a wild ride for oil traders at the start of this year. In early January, prices rallied after the U.S. killed Iran’s most powerful and visible military leader, Qassem Soleimani, in Iraq. Brent Crude prices exceeded US$70 a barrel for the first time since May last year. WTI Crude prices also rose to their highest level since May 2019, rising above US$64 a barrel early last month.

In the second half of January, however, oil prices started sliding amid the coronavirus outbreak in China, as traders began to panic that the outbreak is inflicting the worst demand shock to the oil market since the 2008-2009 financial crisis.  

By Tsvetana Paraskova for Oilprice.com