Oil may fall below US$30

There is a bet that crude prices may decline below US$30 and possibly at or below US$25 in the first quarter as global supplies grow next year.

There is a bet that crude prices may decline below US$30 and possibly at or below US$25 in the first quarter as global supplies grow next year.

AS oil traded at around US$35 a barrel this week for the first time since the financial crisis, there is a bet that crude prices may decline below US$30 and possibly at or below US$25 in the first quarter as global supplies grow next year.

London-based hedge fund manager Pierre Andurand, who’s been betting on falling prices since September 2014, expects global supplies to expand by 1.6 million barrels a day and in Opec (Organisation of Petroleum Exporters) nations by 900,000 barrels a day in the first half of 2016.

Demand growth around the world will slow, and begin to decline around 2022, said The Sydney Morning Herald (SMH), quoting Andurand.

Oil prices have plunged by two-thirds since June 2014 amid a worsening global supply glut. The drop has continued in December as the Opec abandoned output limits at a meeting this month and the first interest rate increase by the Federal Reserve in almost a decade have boosted the dollar and reduced the appeal of commodities traded in the US currency, said SMH.

West Texas Intermediate (WTI) for January delivery fell 42 US cents, or 1.2%, to US$34.53 a barrel at 1.24pm on Friday on the New York Mercantile Exchange. The contract dropped to US$34.29 earlier in the day, the lowest since February 2009.

Quoting Andurand, SMH said there was a large probability of Iranian production returning to the market in March or April starting at 400,000 barrels to 500,000 barrels a day.

Andurand Capital Management manages US$615mil in funds. The hedge fund, which posted a 38% gain last year, has risen 8% this year through Dec 11, said SMH, quoting a person with knowledge of the returns.

Goldman Sachs had earlier predicted that crude oil price would hit US$20 per barrel. If Andurand is correct, the US$25 per barrel he expects by early next year could be a precursor to Goldman’s bet of US$20 per barrel.

@thestar.com.my – Oil may fall below US$30