Oil trader Pierre Andurand suffers big hedge fund loss
London-based fund extends rough run in choppy period for energy markets
Pierre Andurand, one of the world’s best-known oil traders, has suffered a big loss in his hedge fund during a turbulent start to 2020 for energy markets.
Mr Andurand, founder of London-based Andurand Capital Management, one of the last few hedge funds specialising in oil, experienced a loss of about 8 per cent in his main fund in January, according to three people familiar with its performance.
The fund, which last year was managing about $1bn in assets, also lost money in 2018 and 2019, with January extending the streak of declines for a trader who used to pride himself on beating often-volatile oil markets.
The tough start to the year comes after many energy traders were caught out by a reversal in one niche part of the market affecting diesel and high-sulphur fuel oil. The fallout appears to have hit Mr Andurand’s fund. His firm declined to comment.
Mr Andurand, a kick-boxing devotee and former champion swimmer, has in the past recruited a number of Olympic gold medallists to his roster of analysts and traders, working out of offices overlooking the luxury department store Harrods in Knightsbridge, London.
The 43-year-old trader has a reputation for taking big directional bets on the oil price. That helped his fund gain 38 per cent in 2014, ranking it among the world’s top-performing funds, and 22 per cent in 2016.
Before launching Andurand Capital, the former Goldman Sachs and Vitol trader co-founded BlueGold Capital with Dennis Crema, an ex-Vitol and Amerada Hess executive. The fund made more than 200 per cent in 2008, as oil prices first spiked and then collapsed. BlueGold closed in 2012.
However, in addition to those big bets on crude movements, Mr Andurand also tries to profit from smaller inefficiencies by wagering on changes in the price of one oil contract against another.
In January, a popular bet had been that with the implementation of new rules on shipping emissions at the start of the year, known as IMO 2020, the price of diesel would rise while the price of high-sulphur fuel oil would fall, as vessels around the world switched to cleaner fuels.
But the expected tightness in the diesel market did not materialise as refiners proved adept at blending lower-sulphur fuel mixes to boost supplies.
At the same time, some ship owners were keen to keep using high-sulphur fuel oil, either because they had installed sulphur-stripping scrubbers on their vessels, or because they were concerned that the new fuel blends might damage their engines.
As refiners produced less high-sulphur fuel oil, an unexpected scramble for barrels ensued, sending prices spiking higher. The result was that diesel’s premium over its dirtier rival, rather than expanding, fell by almost a third in January.
Crude prices were also volatile, first jumping to near $70 a barrel after the US assassinated Iranian commander Qassem Soleimani, before falling back to near $55 by the end of the month as the coronavirus outbreak squeezed demand in China.