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Pierre Andurand, the trader who rose to fame because of bold bets in the energy markets, is now stepping away from crude oil while sticking with an outlook for higher copper and cocoa prices.
Andurand Capital Management remains bullish on copper and cocoa futures, even as prices for both commodities have retreated from rallies to all-time highs earlier this year, according to a letter to investors seen by Bloomberg. And meanwhile, the firm “fully exited” long positions in oil futures prior to a June OPEC+ meeting, with a current “mixed” outlook on the market, the letter said.
“We will reengage in the oil markets once we obtain greater clarity on the supply side,” the letter said.
The pivot comes as the firm recovers from a record loss last year, ending a three-year winning streak, as bullish predictions on oil markets went awry. This year through May, the Andurand Commodities Fund climbed about 22%, while the riskier Andurand Commodities Discretionary Enhanced fund soared about 63%, according to the letter.
Andurand Capital Management declined to comment.
Last year, Andurand predicted a surge in the oil market to as high as $140 a barrel by the end of 2023. Instead, Brent, the international benchmark, never crossed the $100 mark, leaving bullish commodity trading houses frustrated as OPEC+ supply cuts failed to turbo-charge prices.
The Organization of Petroleum Exporting Countries in June agreed to gradually wind down about 2 million barrels a day of production cuts starting in October. “This decision, along with the various indicators we use to track the oil market, lead us to view the current market setup as mixed,” Andurand’s firm said in the letter.
In May, the firm’s performance fluctuated in line with copper prices, and long exposure in the market contributed to the majority of the company’s risk in its commodity hedge funds, according to the letter.
Copper traded in London jumped as much as 30% this year to reach a record in May, but has since retreated close to 15% from the high. Many analysts expect copper supplies will trail demand in the years ahead as the metal is used in electric grids that will be expanded as part of the transition to clean energy.
“We continue to believe that we are at the beginning of the copper bull-market and that the recent moves mark only the beginning,” the firm said in the letter. “Higher prices come with increased volatility, but we continue to expect copper to move significantly higher over the next decade to incentivise new supply.”
In the letter, the firm cited a “decade-long supply crunch” for the metal.
The firm also remains “very convinced” in its “long cocoa thesis,” noting tight supplies and stronger-than-expected demand.
The firm expects stockpiles held by both New York and London futures exchanges to run out by the end of the year, and sees a deficit of between 650,000 to 700,000 metric tons this season. That’s higher than the 439,000-ton shortage forecast by the International Cocoa Organization, as crops in Ivory Coast and Ghana have suffered from bad weather and disease.
New York futures have plunged more than 30% from an April record just shy of $12,000 a ton. The commodity is still up more than 80% in 2024. Andurand said earlier this year that prices could top $20,000 a ton.
“There has been no significant change in investment views as we continue to expect higher copper and cocoa prices,” the firm said in its letter.
(By Nishant Kumar and Ilena Peng)
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