March 14, 2017 / 9:01 AM / 8 months ago

Oil bull Andurand's fund slides in 2017 even as volatility vanishes

LONDON (Reuters) - The Andurand Commodities Fund, run by asset manager Pierre Andurand, lost some $130 million in value in January-February even as oil prices stabilised and volatility was at its lowest in 13 years, according to data from HSBC on Monday.

The $1.53-billion fund, the largest in the commodities/macro space monitored by HSBC, lost 8.5 percent in value by the end of February, having gained 22 percent last year.

Andurand, who shot to fame in 2008 by correctly predicting the spike and subsequent fall in the oil price from a record $147 a barrel, predicted late last year that Brent would trade around $60 a barrel by the end of 2016 and rise towards $70 by this summer.

In late 2015, he correctly forecast the oil price would trade close to $25 in the first quarter of 2016. Brent hit a low of $27 a barrel in January that year.

A spokesman for Andurand Capital declined to comment on the fund’s performance and what trade, or series of trades, may have triggered the loss.

Volatility in benchmark Brent futures fell to its lowest since early 2004 by late February, as the price traded in a range of just a handful of dollars, supported by output cuts by the Organization of the Petroleum Exporting Countries.

With the exception of natural gas futures which dropped around 20 percent in February, most other energy futures such as gasoline or heating oil also displayed little volatility that month.

Aside from the drop in natural gas, the end of February also saw a significant move in the so-called inter-month spreads for Brent oil futures.

In the first half of February, hopes that OPEC would be successful in speeding up the rebalancing of the market, led to a sharp narrowing of the premium for longer-dated Brent prices relative to front-month prices.

This premium, known as contango, has prevailed almost intact since late 2014. It becomes profitable to store physical crude oil and expensive to maintain a long futures positions when this market structure is in place.

The reverse, where prices for oil for future delivery are below those for prompt delivery, is known as backwardation, a situation that makes it more profitable to sell any oil in storage and to maintain a long futures position.

Reporting by Amanda Cooper; editing by Susan Thomas

Our Standards:The Thomson Reuters Trust Principles.
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