Kelly Evans: The Energy Profiteers

When the price of oil soared to nearly $ 150 a barrel in 2008, he launched a huge controversy over the extent to which “financial speculators” were to blame (here’s a great retrospective). In fact, none other than Gary Gensler – who became chairman of the CFTC, and is now chairman of the SEC – said at the time that he believed speculation “was partly to blame for the surge in prices. commodity prices “.

If energy prices (especially natural gas) stay where they are today, expect it to come back. In fact, overseas, this is already the case. “Robot hedge funds reap record gains from energy crisis in Europe,” Bloomberg reported this morning. Basically, quantitative funds held by Gresham, Systematica and Man Group have turned to “relatively less liquid markets” like cheese, Turkish scrap and European energy as returns in traditional markets have dried up. The funds mentioned are now up between 23% and 39% since the start of the year. (You could have just held Oracle and been up 35%, but I digress.)

Either way, these quantitative funds – and many value investors – are now looking for alpha by betting on energy, to the chagrin of policymakers and consumers. But I would like to point out that none other than the oil king himself, trader Pierre Andurand – who correctly predicted that oil would crumble into negative territory last year – is now “bearish on the long-term outlook of the market. oil and sees renewables as the market to be long, ”according to an interview he gave to Forbes earlier this year.

It is a huge deal. Andurand believes the price of carbon is going up – and after this interview in February, let’s remember, European carbon prices hit a record high last month, at over 60 euros per tonne. “Andurand has become so optimistic about clean energy that he plans to launch a long / short fund that … would give him the opportunity to bet on emerging clean technologies to the detriment of declining carbon producers, which he believes considerably overestimated, ”he added. according to Forbes.

Now investors can chuckle given the recent performance of clean energy stocks. Just this morning, Keybanc expanded its alternative energy coverage to include five new names, only two of which were rated overweight (Enphase and Nextera). Others, including First Solar (-6% year-to-date), Hannon Armstrong (-13%) and Atlantica (-5%), weigh on the sector for reasons ranging from supply chain issues financing and interest rate issues. Only Nextera is even positive for the year among this group. Meanwhile, energy – made up largely of oil and gas stocks – is the second best performing sector in the market, up 25% since January.

But again, Andurand believes that the real money needs to be made in the huge transition to clean energy if anything will pick up speed the higher the prices of oil and gas remain, the more so as the cost of solar and wind power continues to plunge. (This is exactly why OPEC exists – not only to keep the price of oil high enough to make a profit, but also to keep it. moo enough to keep the world hooked.) Betting on the clean energy transition can also involve not only companies but also raw materials, like copper, aluminum and nickel, which will be essential to its production.

Analysts already believe that the global market share of internal combustion engine cars peaked in 2017. Andurand believes that the demand for oil in general will peak “around 2027”. And the more the “speculators” push prices up today, the sooner that day will come.

See you at 1 p.m.!

Kelly

Twitter: @KellyCNBC

Instagram: @realkellyevans

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